After sitting on this trade for weeks waiting for the trend to resume, sentiment shifted on fresh commentary and data to push AUD/NZD to break the trend and stop me out. Here’s a quick forex review.
Original Trade Idea: Getting Back into AUD/NZD Short
Since getting into my first half position at 1.0160, it looked like the trend was going to hold and we’d eventually see a new leg lower after this period of consolidation. Unfortunately for my short position, dovish commentary from RBNZ Assistant Governor John McDermott last week kicked off strong bearish sentiment on the New Zealand dollar. On the other side of the pair, sentiment has shifted into the bullish camp for the Aussie, including a rise from Australia’s leading index data in Feb. Basically, the stories that propelled AUD/NZD over the past year has done a 180 turn–at least for the short-term.
For a second, it looked like 1.0300 would be the line in the sand that would draw in more sellers, but unfortunately for me, it couldn’t hold and the pair hit my stop level at 1.0370 to take me out for a small loss.
1st Half: -210
2nd Half: -120
Total: -165 pips avg./ -1.0% loss
Looking back, I probably could have closed earlier after the RBNZ dovish commentary, but I thought that it may be just short term noise. Plus I was holding a profit in a strong downtrending market. Obviously, it was a game changer for the Kiwi and that’s something I’m still working on–recognizing when the themes change. Besides that, I wouldn’t do anything differently as the setup was solid, but after some time the story just changed.
So, that’s another loss for me and I haven’t been as active lately with the markets pretty much going sideways for the last couple of months. Hopefully this week and next week’s strong list of economic events will be a catalyst for some big summer time moves. Stay tuned!