AU RBA Interest Rate Decision Slated For May 7

The RBA (Reserve Bank of Australia) is expected to keep its borrowing costs at 3.00% as per general market consensus. This follows last meeting’s decision to also keep rates unchanged. However, the RBA Interest Rate Decision has the potential to change the short-term trend for the currency, as a hawkish statement could drive the AUD to the upper end of the range while a dovish statement should do the opposite.

Here´s the forecast for this news release:
12:30am (NY Time) AU RBA Interest Rate Decision Forecast 3.00% Previous 3.25%
DEVIATION: 0.25% (SELL AUD 2.75% / BUY AUD 3.25%)

The Trade Plan
If RBA decides to cut interest rate, we will stay out… If RBA decides to keep rates unchanged, we’ll buy AUD as the market expects a cut. Ultimately we are neutral to slightly bullish on the AUD, as the AUD/USD has shown a certain degree of resilience and should continue after today’s rate decision, especially considering recent news out of China.

Important Note: The only time I´d recommend a spike trade is when there are so much momentum pushing this currency that regardless of spread and slippage, you should end up in profit if you just hold on to the trade.

Outlook Score
Outlook score is derived from market sentiment, focus, and economic indicators for the currency. It represents the long-term trend of the currency and its market perception. In short, a strong Outlook Score means more long-term demand for the currency, and a weak Outlook Score is the opposite.

Definition:
Australian RBA interest rate is often referred to as the “cash rate target”, also called the official cash rate (OCR) or cash rate. This is the Australian base rate. Banks pay this interest rate when they take out a loan with a maturity of 1 day from another bank. By buying or selling bonds and other securities issued by the government the RBA can influence the money supply and thus the cash rate target. A rise or fall in the cash rate often also leads to a change in the interest rates for mortgages, loans and savings.