Today’s RBA was widely expected to retain their interest rates at 1.5% and that is exactly what they did, retain and remained positive of the future growth. As a result of the general sentiment and projections, the AUD gained and this was actually a follow through of the earlier released Q1 current account deficit which was actually on the plus. Prior to this, the AUD was on the receiving end and why not, most investors and businesses attribute the recent Euro rise as a positive and indicative of growth and inflation. Matter of fact, data shows investor confidence is at a 10 year high with unemployment declining and more capital inflow as their equities rise. Further, on Thursday, the ECB during their rate announcement, Mario Draghi is expected to maintain a hawkish stance and at least remain upbeat about ECB’s forward guidance and most importantly if they have any plans of continuing with the ultra accommodative policy and taper QE as the central bank seek to jerk inflation from their current levels.
Back to the chart and it’s my opinion that we continue enjoying the benefits of positive OCR differentials while buying the Aud. As you can see from the daily chart, the double pattern reversal candlestick was formed and confirmed yesterday with a clear sell signal printed by the stochastics. If anything else, the weekly stochastics are overbought and the trade should be nullified if prices reverse and close above yesterday’s highs of 1.5180.
Trade as follows:
Stop Loss: 1.51-Today’s highs
Take Profit: 1.48-region of support-or a 1:3 risk reward ratio
For today, watch the Jolts job opening from the US. It is not a market mover but can provide even better entry opportunities.
Have a good trading day