The Reserve Bank of Australia, Reserve Bank of New Zealand, and US Non-Farm Payrolls, which would be coming against the backdrop of key economic triggers that are yet to be unfolded from these major events, would be something that might play the guessing game on which way the interest rate decisions and labor market data would finally reach the investors’ minds in the market during October.
These three major economic statements do command a lot of powers to move currency pairs, commodities, and stock indices heavily. The RBA’s decision with regard to the interest rate will heavily influence the Aussie dollar tone, and the RBNZ’s Kiwi dollar decision with regard to the interest rate, while NFP’s insights to the US’s job market will most likely dominate the global markets and, in particular, those currency pairs that include EUR/USD and USD/JPY along with precious metals, such as gold.
The above announcements can be well capitalized on by the trader, understanding the potential outcome of these will enable key trade setups to benefit from the volatility created in the market. Focusing on the technical levels and market sentiments, traders will be well-positioned to take advantage of all possible price swings in pairs like the AUD/CAD, NZD/USD, and commodities like gold. In this article, we break down every single one of these key events and look at the best trades you can do this week.
RBA Interest Rate Decision
The start of the week is expected to be pretty quiet, but the interest rate decision from the RBA is going to assume center stage in the Asia-Pacific session on Tuesday. Most likely, the RBA is going to keep its interest rate at 4.10%, mainly due to a minor drop in the monthly inflation figures. However, with the slight probability of the surprise increase, traders are to expect some volatility of the AUD.
- AUD/CAD sets up an interesting technical play. The price needs to break through the monthly double bottom from 0.8598 to 0.8564 to continue its breakdown, and could fill the March 2020 COVID wick if it does.
- A bounce from this level will be a good sign that the AUD has strength and still could anticipate buying back into higher levels.
RBNZ Interest Rate Decision
Interest rate decisions in the Reserve Bank of New Zealand are due to be published midweek. The RBNZ does not really fit into the above scenario because inflation in New Zealand is running at about 6% year-over-year. While market consensus is for it to remain at 5.5%, New Zealand’s monetary policy has been historically hawkish so it may surprise with a hike.
- The traders should look for 0.595 as a key level on the NZD/USD spot. This is a 62% Fibonacci retracement from the lows in September 2022 to the highs in January 2023.
- Upward potential should be seen if the spot remains above the level 0.595.
- Opening for selling of the spot downwards should be opened if it breaks below.
US Non-Farm Payrolls (NFP)
The US NFP report is the headliner of the week, and there is enough muscle to shake the markets significantly. The NFP last month was reported at 187,000 yet, in 2023, there have been consistent downward revisions in earlier reports. This time, the market is on edge to see if the US labor market shows signs of further cooling off, which could influence the next moves by the Federal Reserve in monetary policy.
A metric worth watching would be the unemployment in the US. It increased to 3.8% by August. The magic number, however, is 4% because this is a recessionary level at which the Federal Reserve seems concerned. If unemployment increases past this level then there could be a stronger case for an economic slowdown raising the chances of a dovish Fed.
- Because gold is considered a safe haven, it can be highly volatile before the NFP report. It might fall big if set up to do so with the move towards the 2023 low of $1,825 per ounce.
- A hawkish NFP report would most likely result in the US dollar gaining and pushing gold down, but an economic weakness may result in a pop in the price of gold as everyone goes for the safe haven.
Key Trading Opportunities
AUD/CAD
- There is some chance of a breakdown below the double bottom at 0.8564 for a short opportunity, or if the level holds, a look for longs to hit resistance levels further up.
NZD/USD
- Focus the area on the 0.595 Fibonacci level. There is some upside momentum to break out of there, in case of a bullish breakout, or the bears can get opportunities for shorts in the case of a breakdown.
Gold
- At $1,825 per ounce with a dip, it would be an excellent trading opportunity. If the price falls to this level before the dovish signals sent by the Federal Reserve, then that would be an excellent buying opportunity.
Conclusion
As the month of October begins, market sentiments will primarily be dictated by RBA and RBNZ announcements, along with NFP announcements. Traders need to be prepared and geared up for the volatility regarding currency pairs and commodities that may surface in such economic events. Focusing on the key technical levels and also market sentiments, traders can use their positionings to their advantage during such market-moving announcements. Keep a watchful eye on these critical events and trade wisely to grab opportunities ahead.
