Today’s decision is a straight binary outcome, with rate cuts sending AUD lower and on hold higer. We can however expect more of an upside reaction with rates on hold.
We usually find in the hours leading up to a rate decision that trends have been established in line with the markets expectation. This is not the case today with AUD pairs which find themselves in tight ranges, giving the impression this is still a 50/50 either way.
AUDNZD appears to be forming a Bear Flag / Dead-Cat bounce which leaves me tempted to take a punt short before the decision. The key here though is managing any unfavourable spikes, which is why I would use a wide stop and sensible TP level which is closer to 1:1 than I would usually consider. This way I stand a better chance of riding the volatility, but as always, sensible position sizes should always be used in line with your account size as not to over expose yourself to a single trade idea.
I suspect that AUDUSD will have limited downside from a rate cut alone when we consider the price action over the past three months and it’s failure to break new bearish ground despite a rate cut and soft domestic data. Therefor Nonfarm data is also a big catalyst this week for AUDUSD, with a rate cut and strong US jobs data required to drive it convincingly lower.