Mostly as expected, the Reserve Bank of Australia left its bench mark rates unchanged at 4.5%. This marks a second monetary policy meeting, during which the cash rate was unchanged. This put in doubt the widely predicted target of 5.5% rate by the end of this year. The statement following the announcement was declared by analysts as not “dovish’ enough to support the rate decision. All said, none of this was a surprise, routine, really.

That’s not to say that day was without surprises. In spite of no action from the RBA, the Australian Dollar had a good day. It started to rally very early, on trade data, which was better than expected. Data released by the government revealed very strong surplus of A$1.645bn in May, beating expectations for A$500m. It seems that Australian exports are going strong, in spite of slackening commodity prices and the so called China slowdown. Of course, these numbers are somewhat old, and June data might be different.

Surging Aussie put a kink in my plans for a short trade in AUD-USD, using 4H chart. Intended sell level was at 0.8310, with a fairly large objective. Yesterday and early on Tuesday price was moving rather slowly, but drifting down, so I decided for another trade, with much smaller target.

The low from Monday looked very tempting to short, if the price moved under it. There was not much room to play with, with the next support not far away. Entry at 0.8372 and 45 pips target, before the next low.

Trade worked out pretty well, bringing the targeted 45 pips. Should the price continued lower, next sell order would have been triggered. But that didn’t happen. Couple of hours later the Australian Dollar turned around and started its long climb, which lasted all day. BTW, I’m still looking for sell opportunities. The order at 0.8310 is still valid, and I’ll keep an eye for reversals on hourly chart.

Here is what happened to the straddle trade discussed yesterday. The USD-CHF moved down, filling the sell order. Price moved against it, but not enough to trigger a stop/loss (50 pips). In the end, the trade was closed for 24 pips gain. I have a feeling that we will see weakness in Swiss Franc and not just against Euro. The CHF will probably be discussed here even more often in coming days.

Mike K.