[Completed +103 pips] Strategic Playbook: Trading RBA Policy Through AUD/JPY
Trade details
Monday, November 04, 2024 (Week 44)
Following seven consecutive holds at 4.35%, the November RBA meeting takes on heightened significance as markets assess whether the central bank will maintain its hawkish stance amid persistent inflation pressures. This comprehensive analysis provides forex traders with strategic insights for trading AUD/JPY around this pivotal event, incorporating recent economic data, market themes, and technical analysis to formulate high-probability trade setups.
Trading involves a possibility of losing money therefore all decisions in market speculation are undertaken at your own financial risk.
AUD/JPY as the Growth-Risk Proxy
The AUD/JPY pair serves as a critical barometer for global growth prospects and risk sentiment.
Dominant Theme: Persistent Inflation vs Growth Risks
Based on the September RBA statement, inflation remains "some way above the midpoint of the 2-3% target range" with trimmed mean inflation at 3.5% yearly, requiring continued restrictive policy. The statement emphasised that returning inflation to target remains "the highest priority," suggesting maintained hawkishness into year-end.
Supporting narratives:
Core inflation expected above target until 2026
Labour market remains tight with 4.1% unemployment
GDP growth weakening but consumption showing resilience
Monetary Policy Event: RBA Rate Decision Analysis
The RBA rate decision represents Australia's premier monetary policy event, historically generating significant volatility in AUD crosses. Key metrics from the September statement:
Current Policy Settings:
Cash Rate: 4.35%
Exchange Settlement Rate: 4.25%
Forward Guidance: "Policy needs to be sufficiently restrictive"
Focus Areas:
Trimmed Mean CPI trajectory
Labour market dynamics
Household consumption trends
China exposure risks
Trade Thesis
Above-Consensus Response Plan
If RBA maintains hawkish bias emphasising inflation risks: Position: Aggressive longs Targets: 101.50-102.00 zone Catalyst: Focus on persistent inflation requiring extended restrictive policy Conviction: High based on September statement language
Below-Consensus Response Plan
If RBA acknowledges growing downside risks: Position: Tactical shorts Targets: 98.50-99.00 zone Catalyst: Shift toward balanced risks assessment Conviction: Moderate given existing JPY weakness
Conclusions and Implementation
The November RBA meeting presents defined trading opportunities in AUD/JPY based on clear policy scenarios and technical levels. Key takeaways:
Position sizing critical given event volatility and cross-market correlations
China developments remain key external risk factor
Technical levels provide objective risk management framework
Sources: Reserve Bank of Australia Statement (September 24, 2024), Australian Bureau of Statistics, Bank of Japan Policy Statements Ministry of Internal Affairs & Communications, Japan Trading Economics Data.