Forex Trade Review: EUR/GBP Short & AUD/NZD Short

Both of my only open forex trades closed earlier this week, one winner and one loser. Here’s a quick review and a potential setup to keep an eye out for.

Short EUR/GBP

Original Trade Idea: Hopping on the EUR/GBP Downtrend on a Pullback

EUR/GBP 1 Hour Forex Chart

EUR/GBP 1 Hour Forex Chart

No luck on my EUR/GBP thanks to a shift in sentiment in both the euro and the British pound in the past week or so.  Not only did we start to see positive European economic data and sentiment outlook recently to lift the euro, but sentiment is starting to turn negative on the British pound, especially going into this week’s U.K. CPI data (which turned out to be 0.0% on an annualized basis)!  All together, this pushed EUR/GBP higher pretty steadily, eventually hitting my stop loss level at .7320 to take me out of my small short position:

Total: -130 pips/ -0.50% loss

In hindsight, I definitely should have cut this one a lot quicker when the European data began to become consistently more positive, and when the market consistently held above the 61% and moving averages. The trade was technically invalidated at that point, but I guess I held onto hope the megatrend this market has been on would become my friend again.  Unfortunately not, but it’s a small price to pay to see if it would continue.  I’d take this setup any time again in the future and for now, I will be in watch’n wait mode to see if EUR/GBP tops out because in my opinion, the fundies still favor Sterling over the euro.

Short AUD/NZD

Original Trade Idea: Shorting the Forex Trend Lower in AUD/NZD

AUD/NZD 4 Hour Forex Chart

AUD/NZD 4 Hour Forex Chart

I had better luck on my AUD/NZD short, but I definitely could have played it better.  Not too long after my first entry order triggered at 1.0400, I decided to take off my second short entry order at 1.0500 on concerns that the upcoming Reserve Bank of New Zealand (RBNZ) monetary policy statement would be bearish for their currency like most other central banks as of late. It was actually quite the opposite as the RBNZ was pretty upbeat and set the expectation that no rate cut was needed anytime soon. This had forex traders hitting the buy button quickly on the Kiwi, and I never got another chance to short Kiwi at 1.0500 since then.

After a few weeks of slowly grinding lower since the RBNZ meeting, AUD/NZD finally neared my initial target and I decided to let it trigger to close me out than to adjust to stay in the trade for potentially more profit.  I was closed out at 1.0250 when my limit orders were hit:

Total: +150 pips/ +0.75% gain

Of course, I could have just left my second short orders at 1.0500 and that would have had a really great outcome, but I think it was really a toss up with how the RBNZ meeting could have played out with other central banks cutting/dovish but signs of a stable New Zealand economy reflected in the data.

My other option could have been to add another position right after the meeting and tightening up the total position stop, but that’s a trade management technique I’m still not comfortable with yet. Again, in hindsight, it was probably the right move given the surprise positive comments from the RBNZ.

Overall, I’m net positive from both trades and I think that AUD/NZD is still a legitimate short trade on this pullback.  I’m not interested in short-term trade setups (which is what this move to 1.0300 looks like), but if we do see 1.0400 again, I may consider hopping back in with another position trade. Stay tuned!