Before I close out for the week, just wanted to share updates on my EUR/JPY and GBP/AUD trade ideas, both of which are alive and kicking.
Original trade idea: Swing Short on EUR/JPY
Besides the nice technical setup, I shorted this pair on the idea risk sentiment would remain negative given some weak economic data we’ve been seeing around the globe. Nothing alarming per se, but I think traders may be cautious and lighten up on trades where they are long high-yielders vs. low-yielders, like EUR/JPY.
I still like this trade as 140.00 seems to be the upside resistance and will probably consolidate just under that major psychological level for now, unless we get a new catalyst. I’ll hold on into the weekend.
Original trade idea: Countertrend Short on GBP/AUD
I got into this trade on the idea that we might be seeing a pivot point in monetary policy from both the Bank of England and Reserve Bank of Australia this year–that might have changed this week.
While giving the U.K. inflation report, BOE Governor Mark Carney came out with an optimistic economic outlook for the U.K., on both inflation and growth (Read more: 3 Reasons Why the Bulls Loved The BOE Inflation Report).
Overall, many traders simply focused on the fact that the BOE now has more control in raising its rates as it’s not tied to a single economic indicator. The reaction in sterling was a bullish spike, which has yet to come down.
On the other side of the pair, Australia came out with another weak employment report (-3.7K net change vs. 15K forecast and unemployment ticked higher from 5.9% to 6.0%). This is not good for those currency traders that think the RBA is all done with their rate cuts as we saw a bearish reaction on the Aussie immediately after the release.
This trade I’m a little bit sketchy on as my fundamental thesis might have been broken this week, but sellers are holding on to the area for now and the pair is trading right around my entry price. What I’ll do is see how it plays out through the London and U.S. session before most likely closing out ahead of the weekend. Stay tuned!