- Reserve Bank of Australia (RBA) to Retain Current Policy

- Governor Glenn Stevens to Implement Stronger Verbal Intervention?

Trading the News: Reserve Bank of Australia Interest Rate Decision

With the Reserve Bank of Australia widely expected to retain its wait-and-see approach in October, Governor Glenn Stevens may utilize stronger language to talk down the local currency in an effort to further assist with the rebalancing of the real economy.

What’s Expected:

Time of release: 10/01/2013 4:30 GMT, 0:30 EDT

Primary Pair Impact: AUDUSD

Expected: 2.50%

Previous: 2.50%

DailyFX Forecast: 2.50%

Why Is This Event Important:

The RBA may omit any comments referencing the cash rate as it relies on verbal intervention, but the fundamental outlook laid out by the central bank may sound more dovish amid the slowing recovery.

Expectations: Bearish Argument/Scenario

The renewed weakness in the labor market along with the deterioration in global trade may prompt the RBA to show a greater willingness to further embark on its easing cycle in order to combat the downside risks for growth and inflation.

Risk: Bullish Argument/Scenario

Nevertheless, the spillover effects of record-low borrowing costs may greater concerns of an asset bubble, and a more neutral tone for monetary policy may spark a more meaningful reaction in the AUDUSD as it deviates from market expectations.

How To Trade This Event Risk(Video)

Bearish AUD Trade: RBA Toughens Verbal Intervention; Sees Rate Cut Potential

• Need to see red, five-minute candle following the statement for a potential short trade on AUDUSD

• If market reaction favors a short trade, sell AUDUSD with two separate position

• Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward

• Move stop to breakeven on remaining position once initial target is met, set reasonable limit

Bullish AUD Trade: Governor Stevens Adopts More Neutral Tone

• Need green, five-minute candle to consider a long AUDUSD trade

• Carry out the same setup as the bearish AUD trade, just in the opposite direction

Potential Price Targets For The Release

AUDUSD Daily

Chart - Created Using FXCM Marketscope 2.0

• New Downward Trending Channel Taking Shape; Lower High in September

• Interim Resistance: 0.9500 (38.2 retracement) to 0.9515 (1.618 expansion)

• Interim Support: 0.9290 Pivot to 0.9270 (100.0 expansion)