Tag Archives: RBA analysis

Buy AUD Ahead of RBA Decision

Our best trades over the past month have been on Australian fundamental data so we’re going to continue to stick with what works by buying AUD/USD ahead of the RBA decision at 1.0970. That’s 110 pips below the record high and we’re expecting AUD to blow through that level by the end of the week.

I published my analysis of the RBA at ashraflaidi.com earlier today. http://tinyurl.com/3jhc7du

Let me sum up my thinking briefly:

  1. AUD/USD has broken out technically, hitting a fresh record high of 1.1080 last week.
  2. We have a pullback from the high that’s giving us a buying opportunity.
  3. We’re trading with the trend.
  4. Fundamentally, we read the RBA minutes as much more hawkish than some others and we’re going to trust our experience and knowledge.
  5. CPI was high last week and inflation is above target.
  6. Terry McCrann is a good RBA watcher and he’s overdue for a correct call.
  7. Our downside is limited. We have a 60 pip stop at 1.0910 and don’t expect it to get hit even if we’re dead wrong.

July Trade Review: AUD/USD (+108 pips)

Entered AUD/USA short at 1.0735 on July 4. Exited July 18 at 1.0627. Result: +108 pips

AUD/USD daily July 2011
AUD/USD daily July 2011

Entered with stop at 1.0800 (65 pips). Greatest open loss: 54 pips Greatest open gain: 210 pips

I entered this trade ahead of the RBA decision on July 4. I expected a dovish statement and explained why in a post RBA Will Remain on the Sidelines, AUD Vulnerable  “The Australian dollar is likely to fall if policymakers do not take strong incremental steps toward future rate hikes,” I wrote. “The market is still hanging on to the idea that the RBA could hike in August but we see it as a long shot.”

I wanted to be short USD on July 18 so I exited the trade. Then the RBA minutes were more hawkish than I expected. I wrote this before exiting the trade RBA Minutes Disappoint Doves “What sounded like worries about employment and growth in the statement, read more like a simple adjusting of time frames in the minutes,” I wrote, noting that a high CPI reading late in July could put rate hikes back on the table.” Later in the month I used this perspective and I made money on AUD/USD longs.

What I should have known better: Not much. I could have booked a nicer profit on July 11 but I wasn’t prepared (see my trades in NZD/JPY and NZD/CHF for more).

What I’m happy about: This is what I do best – trades based mostly on fundamentals with some technical underpinnings. I entered the trade ahead of a fundamental event and left the trade as soon as the fundamentals changed. I also didn’t get shaken out by the nearly 300 pip rally on July 11-12.