I got caught in the middle of a “buy the rumor, sell the news” situation on this AUD/NZD short trade, as the Aussie quickly recovered after the RBA rate cut. Here’s how my trade turned out.
I tried to catch a pullback to the descending trend line on the 1-hour time frame after the RBA announced its decision to lower interest rates by 0.25% this week. As I’ve mentioned in my trade idea, the announcement brought the pair below the 1.0500 key area of interest so I thought it had enough bearish momentum.
However, traders started booking profits quickly as the decision came in line with market expectations. Not even the 6.6% rebound in GDT dairy prices for New Zealand was enough to support the Kiwi against the Aussie then, as the ANZ commodity prices index released later on showed a slump from 3.7% to 2.0%.
With that, I decided against adding to my short position on a higher pullback, choosing instead to close early when price seemed unstoppable in its climb past the 1.0600 handle. I managed to trim my loss down to 0.21% from the initial 0.25% that I’ve risked and from the total 0.5% I was planning on putting on the line. Whew!
Here’s what I ended up with:
P/L: -250 pips / -0.21%
Now that the BOE also joined the rate cut bandwagon, expectations for an RBNZ rate cut resurfaced, driving the Kiwi much lower across the board. Even though I’m a bit bummed out about the loss on this setup, I’m gonna give myself some credit for making the necessary risk adjustments and for reducing my downside.
Think I should shift to a short Kiwi position from here? As always, I enjoy getting your feedback on my ideas!
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