Forex Trade Review: EUR/USD & AUD/JPY

Forex Trade Review: 2014-05-27

It looks like currency traders are going back to risk-on mode today on sentiment that central banks will continue keep up monetary stimulus to support economic growth.  This means a flow out of safe haven currencies, like the US Dollar and Japanese Yen, and back into risk assets like European currencies and the Comdolls, forcing me to close trades in EUR/USD and AUD/JPY.

EUR/USD

Original Trade Idea: Euro to Move Lower on Potential Easing?

EUR/USD 4 Hour Forex Chart

EUR/USD 4 Hour Forex Chart

I was taken out of my EUR/USD short position by my tight trailing stop at 1.3655.

Total: +100 pips/ +0.33% gain

I didn’t catch much of the ECB rate cut speculation move, but in hindsight, it looks like I might have been a little late to the party anyway.  In the future, I need to be more aggressive when a new catalyst takes place, like the hints that Mario Draghi gave at the beginning of the month that the ECB was ready to act.

Given that it looks like I missed the meat of the move and that we probably won’t see much action ahead of what the ECB actually does next week, I’m okay with exiting this trade.

AUD/JPY

Original Trade Idea: Doing a Flip On AUD/JPY

AUD/JPY 1 Hour Forex Chart

AUD/JPY 1 Hour Forex Chart

As I often mention, forex sentiment can change on a dime–and that’s what it looks like this week with the Japanese Yen turning lower against the majors.  Not only is it a shift in sentiment, but the market is starting to break the technical arguments for my short trade.  While it’s not yet a solid break of the the Fibonacci retracement area and moving averages, I’ve come to learn that this type of situation often leads to a break to the upside more times than not.

I’ve adapted to the choppier market conditions by being less tolerant of trades that turn against me, which is what I did here with AUD/JPY.  With the pair moving higher, I decided to keep my losses very small by closing manually at 94.45.

Total: -40 pips/-0.26% loss

Overall, I think this was a good setup (both fundamentally and technically) and good execution as I tried to wait for resistance/reversal confirmation, but the story has changed and I’m not one to hope that things will swing back into my favor.  The only thing I probably should have done differently was to go with a smaller unit of risk since I was playing with a tight stop and shorter time frame.

Right now, I’m not seeing big opportunities for a new position as I think volatility will remain low this week (summer trading conditions, end of month, and ahead of big events next week).  But of course, I’ll keep a close watch on the markets and if something does come up, I’ll be sure to share my ideas on my blog.  Stay tuned!