EUR/NZD rocketed higher on Thursday thanks to a combination of broad Kiwi selling and risk-off behavior against the euro finding a bid.
Original Trade Idea: EUR/NZD Breaking Major Support at 1.6000?
After moving my stop to break even in my last trade update, I tried holding onto this short play, but the trend lower just wasn’t in the cards as buyers came in around 1.59 thanks to a shift in sentiment for both currencies.
For the Kiwi, nothing has really changed from New Zealand, but it is lumped into the “risk-on” group of currencies which don’t do too well when broad risk sentiment turns negative. Asia markets got really negative this week thanks to weak China export data and the BOJ not taking further action to stimulate the economy.
On the euro side of the trade, it looks like that despite bearish sentiment from Draghi last week, the euro is finding a bid thanks to sentiment that the ECB is not expected to initiate new quantitative easing measures for now. And just like that, EUR/NZD goes on a 200 pip rally, taking me out at my adjusted stop at 1.6050.
Total: 0 pips
Looking back, I did think the market was looking overdone to the downside as 1.5850 wouldn’t break. I did think about closing half of my position there to lock profits, but the market did look like it was on a new leg downward and I didn’t want to miss big gains going into it with a half position.
Overall, moving my stop was one of the right moves to do as signs that the trend may be over emerged. Closing half would have been nice too, but that’s the trade off for trying to maximize my reward–nothing comes for free in the markets.
For now, I think EUR/NZD will transition into a consolidation phase until the RBNZ monetary policy event later this month, and I’ll continue to watch the market until then for another opportunity to short as I’m still biased to the downside on this pair for the long-term for now.