Well this was a quick one as I had to close my NZD/CAD long position after recent comments from an RBNZ official sparked a broad selloff in the New Zealand dollar. Here’s a quick forex trade review.
Original Trade Idea: Simple Forex Trend Higher in NZD/CAD
Last Thursday, RBNZ Assistant Governor John McDermott sent the New Zealand dollar reeling when he declared that interest rate hikes are not likely to take place anytime soon. He added that their inflation outlook remains subdued and that they might even decide to lower borrowing costs if necessary. This pushed NZD down against the majors, including NZD/CAD lower, immediately breaking the rising trendline support I cited as one of my long trade technical arguments.
The news and the reaction all read like a game changer to me, so with I decided to close my position manually at .9220 not too long after the break (but probably not soon enough) to limit my max loss.
Total: -180 pips/ -0.60%
In hindsight, this was a good trade setup that quickly turned because of central bank commentary, so there wasn’t really much I could have done differently to manage the trade other than close sooner. I probably waited too long to close but I wanted to see if this was short-term noise or not–it doesn’t look like noise so far.
Overall, while I lost, I’m happy I was able to pull out of the trade quickly because it seems like the market is now in control of the bears and that any bounces may be opportunities for more bears to jump in. I may switch my bias to the downside, but for now, I’ll wait to see what we get from this week’s RBNZ monetary policy decision before hopping back into any NZD trades. Stay tuned!