AUD/USD: RBA Interest Rate Cut Setup (May 7, 2013)

In past rate decisions where the RBA cut interest rates, the pair usually makes a strong break to the downside then makes a small retracement prior to the European session. The pair could still pull up to the 38.2% Fibonacci retracement level before heading any lower in the later trading sessions.

A good entry point could be the 1.0230 mark, which is in line with the 38.2% Fib and the former support level. Stochastic is already heading lower on the 15-minute chart though, which suggests a further move down. After all, European and American traders have yet to react to the surprise rate cut earlier today.

A stop above the highest Fib level or at 1.0300 with a target of 100 pips or more would yield a good reward-to-risk ratio for a day trade.

By Kate Curtis from Trader's Way