The ‘surprise’ rate cut

Posted Tuesday, February 3, 2015 by
Skerdian Meta • 1 min read

The Royal Bank of Australia cut the interest rates last night with 25 basis points to 2.25%. The move was unofficially announced last week by one of the RBA members in an interview, so it didn´t come as a surprise at all.
Yet, the Australian Dollar tumbled more than 170 pips and their neighbors’ currency, the Kiwi NZD followed it down.
I just have two things that I can´t figure out:

1. Why did it fall nearly two cents on a move that everyone knew about?
2. Why didn´t I sell this pair yesterday evening before going to sleep?
I guess that slight possibility that things might go the opposite way and that the RBA wouldn´t cut the interest rates made me and the market think twice and chicken out. It Looks like the SNB move, a couple of weeks ago has damaged everyone´s trading psychology after all, making us overcautious.
But that doesn´t mean that we can´t still trade it. We had a small sell signal this morning already. These sorts of moves bring very good opportunities to sell the retraces and that´s the way we´re going to trade this pair today and in the near future. The moving averages in the 30-minute chart are here to help us define the resistance levels as we move up,
if we do go up. First is the 20 exponential MA in grey around 0.7686 and then comes the 50 MA in yellow at 0.7740. Above them are the 100 and 200 moving averages, but they look too far at the moment.
Meanwhile, the EUR/USD has broken out of its range that we highlighted in yesterday´s post and we got caught up in that move.

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