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.
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.
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
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!