I think the pros and cons have been well documented by now, so the interesting bit is now more on positioning ahead of the meeting. While the swaps market is pointing to a 58% probability of a cut, 48% of our clients are short AUD/USD with the majority favouring longs at the moment.
There are two schools of thought. It could be a ‘sell the rumour and buy the fact approach’, which would see AUD/USD rally post the meeting. On the other hand, if the RBA disappoints in any way, it will lead to a reversal of magnitude and some traders will be looking to take advantage of that.
As a result, there are two plays here. Traders looking to ride the near-term momentum could target levels around $0.8000. In that region, sellers could be looking to come back in and I still feel in the medium term the AUD is a short.
Alternatively, if traders who are long at the moment got this trade wrong, then momentum plays on a break of recent lows could be the trade. Remember AUD/USD traded as low as $0.7720 and that’ll act as near-term support.