Busy morning for both the Aussie and Kiwi today, with the big market mover coming from the Reserve Bank of New Zealand, a surprise that took my out of my AUD/NZD short.
Original Trade Idea: Another Forex Short on AUD/NZD
Today, we got a rate cut surprise from the Reserve Bank of New Zealand to cut the Kiwi down to size, and small improvements in industrial production and retail sales data from China to provide buying support to the Aussie. Overall, it was the RBNZ cut that was the surprise to forex traders (unless you read my main man Forex Gump’s RBNZ monetary policy statement preview) that took me out of my longer-term short position in AUD/NZD at my trailed stop of 1.0950.
Total: -150 pips/ -0.50% loss
In hindsight, I probably should have closed down the trade ahead of the RBNZ statement to avoid the event risk, but having already trailed my stop to reduce my max risk, the potential risk-to-reward looked very attractive with the odds of a rate cut/hold still kind of foggy. And plus, I was a little bit positive in the trade before the event, but not enough to for me to say that it was enough to lock it and feel okay with. But the adjustment for the future for me would be, to just get out in situations like this: ahead of central bank announcements and uncertain conditions.
So, it’s a small scratch, but fortunately I have an open winning trade in my CAD/JPY long that will hopefully continue to move in the direction of the trend and offset today’s loss. Stay tuned!