Currencies began trading on a very soft note, with little volatility when compared to the last week. It seems that real volume is holding back, before the slew of important fundamental announcements in coming days. They do not get any bigger – five central banks have their policy meetings, while the employment data will in the USA and Canada will dominate Friday. The first interest rate decision is just few hours away, when the Reserve Bank of Australia convenes.
The RBA should receive plenty of attention. While analysts as a group do not predict a rate cut, there is no consensus. Growing number of market participants expect the cut, which was probably behind the selloff in the AUD in early trading on Monday, the only real action in Forex. Another currency to watch on Tuesday is the British Pound. No central bank meeting yet, that comes on Thursday, but the Services PMI could easily create volatility. This sector accounts for about 70% of economy, so this reading is in many ways more important than the Manufacturing PMI. The forecast calls for a small decline, from 51.5 to 51.0, but if it is much lower, especially below 50.0, the Pound is likely to suffer another selloff.
While on the subject of the British Pound, yesterday I discussed a potential trade in the GBP-CHF. I skipped the initial, post-opening move down and adjusted the sell order to 1.4150. Unfortunately, the trade did not work out and I took a loss of 43 pips. For now, as the price is slowly moving higher, I am tracking the latest minor low on the 15 M chart with another sell order, looking for 40-50 pips when the correction happens.
In a similar manner, I am also looking for shorts in all the Yen pairs. It will be interesting to see what happens after the RBA rate decision. What happens to the Aussie following these events often sets the tone for other currencies and could last better part of the day.