With the BOC and the ECB gearing up for their monetary policy statements this week, it’s time for me to make some adjustments to my USD/CAD and EUR/AUD forex positions. Make sure to check out my initial trade ideas first!
I spotted this double top pattern on EUR/AUD’s 4-hour forex chart then waited to short on a break of the neckline around 1.5200. I was able to get in at 1.5035 when Australia’s economic reports started beating expectations last week, and it’s currently up by nearly a couple hundred pips.
However, China’s weaker than expected trade balance released earlier this week brought risk-off vibes back to the table, weighing on the higher-yielding Aussie. Also, I’m a bit worried that the ECB decision might spur another euro rally if their easing plans turn out to be disappointing.
Because of that, I’ve decided to adjust my stop loss from its initial position at 1.5425 down to 1.5025 to lock in some pips on this short forex trade in case price suddenly pops higher while still giving me a chance to profit if the pair drops like a rock during the ECB statement.
Thanks to your feedback and words of encouragement in my earlier USD/CAD update, I was able to frame my thoughts better and identify the factors driving the pair’s price action. As I’ve mentioned in my responses to your comments, it appears as though crude oil’s gains are spurred mostly by speculation rather than the actual state of the market, and the latest report from the API showed market watchers that a supply glut is still present.
From a technical standpoint, it looks like price is starting to break below the trend line so I’ve decided to trim this position by closing half at market and let the rest ride. Some of my dear readers pointed out that fundamentals favor a bounce and reminded me that I’ve set stop losses for valid reasons anyway.
With that, I took in a 0.26% loss for USD/CAD, reducing my potential loss to just a little over 0.40% if price tumbles all the way down to my SL at 1.3175. Hopefully my EUR/AUD position makes it to the PT for a possible 0.75% return to make up for it!
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