All the Reserve Bank of Australia Has Left Is Jawboning

(This is an excerpt from an article I originally published on Seeking Alpha on February 4, 2014. Click here to read the entire piece.)

The Reserve Bank of Australia (RBA) made it official: the low interest rate cycle has reached a trough. In its latest Monetary Policy Decision on February 4th, the RBA concluded (emphasis mine):

“In the Board’s judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.”

Combine the promise of no further rate cuts with a balanced economic outlook, and traders immediately looked across the pastures and over the hills to a time when the Australian economy is humming again and the RBA is hiking rates. In response, the Australian dollar (FXA) immediately soared against all major currencies:


The Australian dollar surges off the bottom after the RBA implies a trough in interest rates
The Australian dollar surges off the bottom after the RBA implies a trough in interest rates

Source: FreeStockCharts.com

{snip}

For now, until/unless AUD/USD closes firmly above 0.90, I think it is still good for fading on rallies. Beyond that, I will have no choice to flip back to a bullish trading bias.

Be careful out there!

(This is an excerpt from an article I originally published on Seeking Alpha on February 4, 2014. Click here to read the entire piece.)

Full disclosure: short AUD/USD

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