RBA Preview 7th June 2022

hi there traders now i just want to give you a quick rundown before the rba cash rate now it's probably a little bit later than what i uh wouldn't would have liked to have done but uh let's just rip into it now just before the you have a look what the rba is going to do just have a look where the market is right we've got uh us equities lower okay we've got a risk off profile very clearly in the market okay euro stealing is it kiwi going to the downside now that's just the framework that we're working off so this is where it comes back to looking at the numbers now prior number 0.35 the expectation is for 0.25 now there is of a rate hike there is a chance for 0.5 that's the unexpected one where we should see the aussie sort of rush a bit further to the top side now these are convoluted events there's the announcement then there's the statement then they generally have some sort of sidelined press conference as well where they throw in a bit of extra stuff so the the general forecast right now is for plus .25 that's the norm right so if that doesn't happen right so like they are going to raise rates but if they didn't it would just just collapse right which goes with the risk-off profile that we are currently seeing in the market now as i said there's a chance for a plus point five percent uh hike it's a little bit drastic i'd say they need to do 0.5 to try and catch up to the market but um you know they don't like to really rush out it sort of scares the market everyone starts screaming blue murder about interest rates going up and all that sort of stuff so it's a bit of a line ball decision here around what they do now you've got to think about what are you going to be trading right so if you are looking at the um the major pairs here obviously the key events the aussie so when it comes to the aussie you're either looking at the aussie against the dollar right and it's just broken down over the last what six or eight hours 12 hours uh to the downside but you need to know a bit more about this right so just on uh this is where i would come in always check your multi-time frame right so let me just change the pen here okay all right i know i'm very conscious we don't have much time so the uh on the hourly chart okay it's broken down short-term momentum well if anything it's a little bit soft but if you look at the daily okay the weekly and the monthly unlike a lot of the other major pairs it is sort of trading mid-range right so you don't have the luxury of this instrument being in an uptrend or a very clear uptrend or a very clear downtrend right you've got the short-term um alleys suggesting downside is the way it's going that's pretty much it so that's not as good as some of the other major pairs now the other thing you should be looking at very closely is coming back to the aussie template now trying to work out what instrument here is best to trade right we've got trend lines on some of these pairs aussie kiwi actually if i just show you that the i think it's uh let me just get off that okay i just have a look at 11108 it hasn't been above this level since uh 2018 right so four years i mean aussie kiwi for those who are just new to the market for 20 years it's always set around 125 and for the last five or 10 years it sat around 105 which to me it's always been mis misplaced but what we are going to potentially see especially if they go half percent we're going to see the balance between the rba and rbnz get a bit more level and if they talk about in their statement higher rates well then you'd expect the aussie to start outperforming the kiwi right that's that's for sure so aussie kiwi i've never really been a big fan of the widowmaker but it is worth having a look now with these other pairs you can see it's sort of in the middle of nowhere right uh if if they do raise by half percent you've got to expect all these instruments to go down uh well sterling aussie euro was it just the way they quoted aussie cad and the other pairs just to have a short term spike for the top side but sometimes it's easier right to identify what to trade by having a uh look here let me just move this thing out of the way change pages okay so just having a look at the relative strength here of um of the aussie against other instruments right you can see where it's underperforming right a rake hike like against the cad obviously the cat has been rallying aggressively with that moving oil this is a chance where a half percent rate hike would uh definitely give it some sort of correction to the top side um at the top here you're looking at things that aren't so positive right because aussie yen's already rallied so much so you're looking to me i need to be looking at the pairs that haven't been performing that well and try and get those going now as i said the aussie technically against the dollar isn't like an awesome trade setup right it doesn't look you haven't got everything working for you as far as big trends and everything else you just got a short-term trend line looking at the aussie against the major instruments no surprise it's pretty much the same as the hourly ones with um the aussie against the dollar and aussie cad the sort of weakest performing pair so looking against the kiwi i think there's room for top side movements for sure on a half percent hike uh and against the euro sterling or swiss uh or swiss probably more so than the sterling potential chance there as well um now so that's that's where we are now when you are coming to work out right let us come back to the major fx template here so when you're trying to work out what to trade you look across the currencies right and you think well there's not there's a little bit of um uncertainty around some of those now the weaker ones if they raise by half percent i'd be focusing on those now don't forget there is this statement following that that can contradict contradict things one thing is for sure this is globally right if the central banks raise interest rate equities get hit now i know the the equity markets already have uh are expecting they're expecting 0.25 right if we get half percent then i would expect the equity markets to even run further the equities may be the easiest option the equity indices to be trading probably rather than maybe the currencies right if you can't find a currency to trade you can't find the equity indices they're the two key things that are impacted by an interest rate change right currency on an interest rate hike goes up right but this don't forget this point two five has a hundred percent factored in the point five percent's probably thirty percent factored in so that's where the move will be so don't think that if they raise by 0.25 that the equity is going to rally they probably probably won't right so you've got to pre-plan the trading instruments you find where the area where the where the easiest trade is right it's not about finding the hardest trade and the one with the hardest um uh things going on it's just the easiest now just to back up and if you're looking um for a sort of extra reinforcement here's the aussie in the alleys unfortunately the commodity market is still sort of going up a little bit sideways it's not helping with that downside move if say for instance they only go by 0.25 and the statement comes out well you know we've done our best for the moment that's it right i don't think we're going to get that statement anyway i think what we're going to get is a situation where they're going to raise i wouldn't be surprised if it's plus 0.5 if it well let me just go from back to the beginning if it's plus 0.25 they will come out and say we're going to go again and again right very much like the fed and the rbn said they want you to know that further rate hikes are coming so you can prepare yourself financially to manage those right the thing is if they raise by 0.5 they may not be that aggressive with their statement now this is the real kicker which is where i think the aussie could really take off if they raise by 0.5 and they also dig the boot in and say you know what we're going to raise rates uh next month and the month after and then by then once we're at three percent well then we'll work out where inflation is that's super aggressive that gets the aussie rolling equity markets the the all ordinaries will get hammered the aussie will rally against all those other instruments and away you go so but what's the chance of that i don't know maybe 10 15 so you're going to weigh up your the options here the best trading decision will be once you've read the statement right had a chance to digest what the change was what they've said about what they're going to do in the future then it becomes an easier trade of course you may miss the first 30 40 50 points but you will also avoid the convoluted uh volatility if it's not all in sync right i think all the central banks are doing this right they are coming out aggressive and they are hitting the market hard with uh rate changes and very aggressive forward guidance that's what i expect so i expect the aussie to uh rally so but when you're looking for the aussie to rally what pair should we be looking at well have a look across the board as i said on that that relative strength chart have a look for the ones that are have got close trend lines they will all run right so for instance if you like uh sterling aussie or euro was he they're not they're in the middle of nowhere right just at the moment reduce your trade size give yourself a good 30 40 point stop loss 50 point stop loss with a small trade size get you into the trade make some cash right this is not as easy as trading the cpi because we know what the outcome for the cpi is it's one number it's strong it rallies it means they're going to raise rates this event has a a statement the rate of decision press conference there's a lot of variables here that you can't control so overriding if you are looking across the board here look for pairs that have some sort of well aussie yen is actually the best trending uh instrument for uh the aussie at the moment and if anything aussie kiwi is going with it and aussie swiss uh euro was he stealing aussie aussie cad they're in the middle of nowhere reduce your trade size get into the trade and then see how it plays out from there all right guys good luck it's going to be interesting to see how this plays out i'm going to get this up later before it actually happens see