Technical Analysis: RBA Tuesday and How to Manage Your AUD/USD Risk

June 2, 2015

Welcome to RBA Tuesday from a clear but brisk Sydney.

In today’s Asian Session Morning Blog, the chart of the day took a look at where AUD/USD sat going into the RBA’s Monetary Policy Statement. I wanted to go a little further than just looking at support/resistance on a chart, and try to identify where the greatest risks were if you were to trade through the release.

The RBA is expected to hold, that is almost a certainty. The real expectation is that traders are hanging on, is whether they will add an easing bias to their statement.

AUD/USD Daily:

Click on chart to see a larger view.

We can see that price is sitting just above the marked, red demand zone where we expect some buyers to look to enter the market. The fact that the zone lines up with the broken short term channel that could now act as support adds to the argument of buyers waiting to enter in this zone.

Combining both a market expectation and a technical level, we can start to now build our likely scenario and as traders, the idea of this should be to avoid the biggest (uncontrollable) risks.

With price about 100 pips off the bottom of the demand zone, is now really a good place to be holding a short into news? Say the RBA does the expected by holding rates and adding an easing bias, does the pair have the room to give you a nice move? No, it does not.

What if the RBA doesn’t play ball with expectations and decides to not implicitly word a strong easing bias into the statement? Price would most likely rip higher as it broke expectations but combined with already being so close to demand, you’re going to get buyers joining the party.

The biggest Forex risk heading into the release, no matter the outcome, is being short. Be aware of it, and manage it accordingly.

Let us know how you’re managing your AUD exposure on the Forex Market heading into the RBA? Leave a comment below or mention @VantageFX on Twitter.

Dane Williams – @VantageFX

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