Taking Another Shot at GBP/NZD – Closed Trade

Closed Trade: 2013-12-13 11:40 ET

After entering my trade, we got a good amount of volatility, but it was limited to a range as the pair danced around my entry price all week. With the weekend just ahead, and a small bit of profit, I decided to close out to avoid weekend risk.

GBP/NZD forex trade review

GBP/NZD forex trade review

As mentioned in the chart above, there was quite a bit of movement this week, but it was contained in a range. This was despite some bullish comments on the New Zealand economy from RBNZ during the RBNZ monetary policy decision (left rates at 2.50%); Wheeler stated that the economy has been expanding by more than 3% and that because inflation may be an issue, the RBNZ may need to hike rates to combat the uptick in inflation pressure. While this was expected, and probably priced in, I thought we would have seen a stronger move to the downside.

At any rate, the weekend is quickly coming up and the European session was going to end soon, so to avoid weekend risk, I decided to close my trade out manually at 1.9800.

Total: +50 pips/ +0.0625% gain

I’m kicking myself a little bit because only a few more minutes later, the market started dropping and we saw a bottom around 1.9700, which was probably due to the comments from BOE member Spencer Dale commenting that it may be a while before we see a rate hike from the MPC, regardless of the strong data in 2013.

In retrospect, I should have waited for the very end of the European session, but I didn’t think we’d get any more movement in the pair as the last catalyst (Dale comments) came much earlier in the session. Besides that, I probably could have added another position at 1.9950 because my risk was so small, but since I didn’t pre-plan that, it would have been impulsive to do so, so I don’t consider not adding a mistake.

Overall, I think my entry and exits points were good, I just didn’t get the follow through I was hoping for–at least not this week. I’ll re-assess again on Monday, and I may even jump back in if the story still makes sense.

That’s it for my trading week…time to finish up my trading journal and get ready for another action packed weekend of football and basketball! Thanks for checking out my blog and I’ll see ya next week!

Trade Idea: 2013-12-09 23:22 ET

It looks like I was a bit early in my last attempt to play 2.000 on GBP/NZD.  Now that the pair has seemingly confirmed resistance, I’m taking another shot at playing a potential move lower.

GBP/NZD 1 hour forex chart

GBP/NZD 1 hour forex chart

Fundamentally, both currencies have been relatively strong vs. the rest of the majors, so it’s tough to have a directional bias.  But I’m more for the Kiwi Dollar in terms of interest rate differential and the potential for that to increase given the jawboning the RBNZ has done all year.

Now we do have a the RBNZ monetary policy decision this week, and with positive economic data from around the globe, I’m positioning for more positive commentary on rates and New Zealand’s outlook.  No major reports for the UK this week other than the Manufacturing Production numbers (forecasted lower than previous month) later in today’s European trading session. The reaction to this report tends to be mixed, so I’ll be a little caution with my entry today.

Technically, the 2.0000 did bring in sellers, probably more so on the broad risk-on sentiment currently driving the markets; the Kiwi tends to be a beneficiary of that sentiment.  After dropping nearly 400 pips from the 2.0000 level, we’re seeing a Fib pullback to the broken support area, possibly now resistance.  I’m taking a very small position there to what could grow into a much larger one if the market goes my way.  My initial stop will be the average daily range of about 200 pips, and I’ll initially be targeting the middle of the longer-term range between 1.9000 – 2.0000.  Here’s what I am doing:

Short a quarter position GBP/NZD at 1.9850, stop at 2.0050, target at 1.9500

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

This initial position gives me a potential return-on-risk of 1.75:1, on 0.25% risk.  I also get positive carry if I get in this trade.  If the market does go my way and we see a break in the recent swing lows (1.9635), I will look into adding another position to maximize my profit potential.

With my orders in, nothing to do now but wait and see if I’ll get triggered, what the RBNZ will say, and how the markets will react to it. Until then, time for me to catch up on some NBA action and Kobe’s return!

  • FxSniper

    Potentially great trade. I have been short since 2.0124 and added a second at 1.9831 last night. I target 1,9500 area but it is possible to move much lower into overall range low. let’s see how we do by friday. Goodluck… you need it on this mover!

    • cyclopip

      Looks like you’re killing this trade dude! If it keeps going down and you press it all the way, could be a really nice end to your trading year. Good luck!

      • FxSniper

        Yes. It’s going ok so far. We shall see if it honors 1.95, which is where I like to take stock of it and see what happens. Did you manage to short?

        • cyclopip

          Yup, got in at 1.9850 and saw a drop to 1.9730 before poppin higher. It looks like it’s consolidating, so this may turn into a breakout move. Hopefully to the downside for the both of us 🙂

          • FxSniper

            Your entry looks great to me and all things being equal…we should hit some… Good luck to us!

  • ForExchange

    Hi Currency Cross-Eyed!

    I hope this time it will function better then the last time with this currency pair! 🙂

    Regards

    • cyclopip

      Hello ForExchange! I hope so too, but you never know how the market may turn–especially for currencies! I think I managed my risk well and it’s up to the market from here. Nothing to do but wait 🙂

      • ForExchange

        Hi cyclopip,

        it is really a pitty that you got out too early. I am still in, and made a nice profit.

        I am new and do not get something. I read everywhere that you guys close the trades. Why does it make a sense? I close trades rarely. If the trade goes down I move my “take loss” point with the currency movement. I did it all the way and if the currency would retrace I still have a profit, only not so high because of my new exit rate. But until now the currency moves fine. Does it not make much sense how I always changed my exit point?

        What do you think, how is the pair going to move next week?

        Regards,
        ForExchange

  • FxSniper

    I was short on this mover too but have booked my short after yesterday’s price action, which I think is now heavily favoring the bulls. I’m already long it off 1,9820 with stp just below 1.9600 and targeting 2.10380.

  • Andre van Biljon

    The pair is currently ranging, but is overall in a bearish trend. Wait for candle to close below 1.9700 (important) on the 4hr timeframe (below the Kijun on the daily timeframe), then enter short trade en let it run. Potential 400 plus pips. Previous support was at 1.9130. That will be my target level. See 4hr timeframe on the Ichimoku. If it does not break 1.9700 to the downside an temporary upward move might be possible again. Let’s wait and see what happens next week.

    • FxSniper

      I don’t see the overall bearish picture. A massive range action yes but since last bouncing off 1.8860, the swing has been steadily up and that is hardly a bearish trend. Instead it is clearly bullish from that point of view. After firming against another pivotal level in 1.9600 recently, I do believe that the bullish trend is still in tact. Pair has to convincingly close below that level before I can consider any short action. I should in fact give this pair the benefit of 1.9500 before considering a short. To me, pair is poised for a finish at 2.104 as we go into year end. I am long at the moment and will take a loss a few buffer pips below 1.9600

  • FxSniper

    I am still long this pair and added a second at 1.9700. will see how much I garner from this terrific runner! My overall bullish target remains 2.1040 area