Forex Adjustments: EUR/NZD Close & Re-Entry

My adjusted stop on EUR/NZD to lock in profits was triggered after a bearish inflation report from New Zealand. I still like the forex setup so I’m entering once again.

Short EUR/NZD

Original Trade Idea: Forex Trade Idea: EUR/NZD Short

EUR/NZD 4-Hour Forex Chart

EUR/NZD 4-Hour Forex Chart

I’m glad that I locked in profits yesterday because New Zealand inflation expectations were not good and it definitely had Kiwi traders lightening up on long positions.  The bearish sentiment was enough to push EUR/NZD higher and quickly close out my full position at my adjusted stop at 1.6875. 

1st half: +25 pips
2nd half: +225 pips
Total: +155 pips avg./+0.45% gain on 1.00% risk

So, a nice gain for a short-term trade and with the resistance area still not invalidated, I’m still bearish on this pair.  Also, I still think New Zealand is the stronger economy between them and Europe, and of course, the interest rate differential still favors holding the Kiwi over the euro, still a big thing in this low interest rate world.  Think this could provide support for the Kiwi vs. the euro, at least until we get to the next RBNZ monetary policy meeting on March 9, where we could get another interest rate cut.

Until then, I’m going to play with the house’s money and try to catch more pips for the next week or so by running the same play, but this time with smaller risk initially.  With New Zealand PPI coming up soon, I’m going to only go with one half position for now, the same stop and targeting the most recent swing low beyond that 1.6500 support area.  Here’s what I’m doing:

Shorted half position at market (1.6940), max stop at 1.7375, max target at 1.5900

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 0.50% of my account for now with this trade structure, and I have a potential reward-to-risk ratio of about 2.39:1.  And if the market pops higher, I’ll re-assess and see if it makes sense to add a second position as I did last time.

Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!