With a couple of major economic events out of the way, I thought it would be time for a quick update on my NZD/CAD long and EUR/USD short forex ideas.
Original Trade Idea: Forex Trade Idea: NZD/CAD Long on Pullback
My NZD/CAD long is a play on the rising trend, mixed in with the bearish sentiment on the Loonie because of the recent drop in oil prices. Today, we got the latest monetary policy decision from the Reserve Bank of New Zealand to hold interest rates at 2.50%, but they did leave the door open for a potential rate cut, which is likely what made the Kiwi drop after the announcement. After opening a small quarter position at .9350, it looks like I’ll get into my full position of 0.50% risk soon as the market heads to my next buy level of .9000.
I’m keeping my trade and orders open because I think longer-term, the Loonie will continue to have more down days than the Kiwi because of oil, and the interest rate advantage still favors the Kiwi (2.50% vs. 0.50%) even if the RBNZ eventually ends up cutting 25 or 50 basis points. So, I’m happy to get in at even a lower price if triggered, and if I’m wrong, I still only have a max 0.50% loss.
From here, I’ll wait and see if I do get triggered, and if I do but there’s a strong break of .9000, I will close early to cut my max loss. If not, I’ll just sit back and continue to monitor the position, collecting rollover interest in the mean time. And the events to watch for the rest of the week for this pair are the monthly Canadian GDP and industrial numbers on Friday, so I’ll be ready to adjust then if necessary.
Original Trade Idea: Forex Trade Idea: EUR/USD Range Resistance?
My first quarter position was triggered today on my EUR/USD range play at 1.0900, and that area seemed to hold as resistance well during the volatility following the FOMC monetary policy announcement. They made no changes to interest rates, but they did change their outlook a bit, citing global issues as a potential impact for their pace of interest rate hikes. For now, it looks like a rate hike in March is less likely that before the meeting, which may push forex traders to lighten up on Greenbacks in the short-term.
In the long-term, I still think the odds are for the U.S. dollar to strengthen against the euro on monetary policy and economic advantages in the U.S., so I’ll continue to hold this trade. One adjustment I may make is to roll my second entry down to the 1.1000 handle (while keeping the same stop at 1.1125), but I’ll likely wait and see if that level is tested first and if it holds.
So, I’m in watch mode for both of these pairs and I’m looking out for new shorter-term ideas now that we’re past the FOMC meeting. Stay tuned for updates, adjustments, and new ideas by following me on Twitter and Facebook!