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