Forex traders flipped back to taking risk in recent sessions, sending the comdolls back on the upswing, which was not great for my short CAD position.
Original Trade Idea: Forex Trade Idea: EUR/CAD Rising Trendline
Withe the Federal Reserve holding off on raising rates in the US–and their broad dovish outlook on the global economy–the idea that “easy money policy is here to stay” has currency traders back in risk-on mode. This prompted forex traders to get out off their USD longs and buy back into high-yielders like equities, commodities, and the comdolls.
Looking at the four hour chart above of EUR/CAD, we can see that this shift in sentiment pretty much negated my technical argument for potential support now that the market is trading below both the rising trendline and the 200 simple moving average. And the downside break was enough to push the market to my max stop loss level of 1.4550 and take me out of the trade for a small loss.
Total: -350 pips/ -0.50% loss
In hindsight, I probably should have closed early since there was a fundamental catalyst and a technical invalidation, but with the Fed’s gloomy outlook, I thought the bullish sentiment on risk would be short-lived. I still don’t know if that’s the case and that CAD will sell off again, but for now, my original plan says it was time to get out, so I’m okay with it.
With the change in sentiment, I’m going to sit back and see if EUR/CAD can break out of that new consolidation pattern now forming between 1.46 – 1.47. If there is a breakout to the downside, I’ll likely go with the new trend and fundamental theme, and hopefully make back my initial loss like I did with my GBP/NZD adjustment. Until then, stay tuned and have a great weekend!