Banking on the Kiwi: Buying NZD/CHF – Trade Closed

Trade Closed: 2013-07-31 03:11

NZD/CHF Chart

It turns out that news from Australia was a bigger deal than I thought it would be. With RBA Governor Stevens saying that there was still a ton of room for easing (hint: rate cut!), the Aussie took a dive in the deep end yesterday. While I did anticipate this, I didn’t think it would also weigh down the Kiwi, which led it to being one of the weaker currencies.

Meanwhile, the franc benefited from some safe haven positioning ahead of the FOMC and ECB statements, allowing it to stand its ground.

This strange combination didn’t bode well for my trade at all, as it allowed NZD/CHF to slip past the rising trend line, hitting my stop loss in the process!

Stopped out at .7390: -50 pips / -0.33%

I guess there are some lessons to be learned from this loss.

First, when trading the Kiwi, I shouldn’t take Australian data lightly, as it can certainly have an effect on NZD trading.

Secondly, I realized that this pair had a humongous 6-pip spread, which partially explains why I got stopped out even though my charts show that it went down to as low as .7393. This doesn’t meant to say that I’ve unjustly stopped out – after all, I do think that all those candles closing below the rising trend line invalidate my trade idea. My point is, with really odd pairs like NZD/CHF, I may have to take into consideration the spread when calculating for position size.

Nevertheless, I ain’t too bummed about this loss. I limited my risk and I still live to fight another day!

Thanks for following fellas, good luck on the rest of the trading week!

Trade Idea: 2013-07-30 03:45

I’ve got my eye set on NZD/CHF’s rising trend line!

NZD/CHF Chart

A funny thing I noticed about these odd crosses is that once they develop a trend, they really stick to it! Luckily, I caught sight of this setup just as price tested its rising trend line.

From a fundamental standpoint, I have good reason to believe that the Kiwi will appreciate in the mid-term. Last week, the RBNZ Governor Graeme Wheeler signaled that a rate hike could occur in 2014, confirming to the markets that the RBNZ is one of the more hawkish central banks out there. With that said, it only seems natural for the comdoll to gain ground.

So here’s how I set up my trade:

Bought at market (.7440), stop loss at .7390, profit target at .7530. Risking 0.33% of my account.

I bought right on the ascending trend line, set my stop below the previous lows and the .7400 handle, and I’m aiming for the previous high. If everything goes according to plan, I should be walking away with a return on risk of about 1.8:1.

You’ll notice that I cut back my usual risk on this trade. I did so because I feel like there’s a lot of event risk involved in the coming days, what with the U.S. set to make its FOMC statement and release the latest NFP figures.

Still, overall, I think this setup is worth a shot, so I decided to dive in with a smaller risk exposure.

How do you guys feel about this setup? Let me know in the comment box below!