What happened and what are the takeaways?
AUD/CAD Resistance Reversal?
Almost two weeks ago, I decided to short AUD/CAD ahead of potentially weak Aussie jobs data versus a combination of a bounce in oil after the OPEC deal and the likelihood the Bank of Canada would hold off on further stimulus given the large moves they already made.
Well, Aussie jobs surprised to the upside, and the Bank of Canada surprised with more stimulus to aid the Canadian economy. The reactions weren’t huge, but AUD/CAD did move higher through the end of last week and into this week.
And with the Aussie continuing to find strength, likely through their strong handling of the coronavirus pandemic, I decided to close this trade manually (0.9084) yesterday well below the stop:
Total: -219 pips / -0.37% loss on 0.50% max risk
Looking back, I probably should have cut this trade earlier after the surprisingly positive Aussie jobs data and BOC moves, but I stuck with the trade as the technical argument remained valid.
That was my mistake in this particular situation in that I was going to have a loss anyway, but I could have made it smaller and the fundies strongly said I should have closed.
GBP/CHF Fib Short Play
Last week, I went for a short-term technical play on GBP/CHF, trying to catch the downtrend ahead of likely terrible UK business sentiment data ahead.
Well, the business was horrendous (Record declines in UK manufacturing and service sector output as public health crisis continues), but GBP/CHF rallied on the session, most likely on Swiss franc weakness, which was tracking the euro lower after Europe’s own bad business sentiment data and news the the ECB will accept junk-rated bonds.
The pair did manage to find resistance around the 1.2070 handle before reversing lower, so I thought technicals would draw in furthers sellers. But this week, the weakness in the euro and franc continued, enough to push GBP/CHF up to my max stop at 1.2080 to close out my trade.
Total: -101 pips / -0.50% loss on 0.50% max risk
So, pretty much the same mistake as my AUD/CAD trade as I held on due to the technicals looking like a high probability that a reversal lower was still in the cards.
My other possible mistake was also pairing GBP with CHF, but with global risk sentiment leaning negative as very bad global economic numbers were being put out at the time ( Coronavirus ‘Great Lockdown’ to shrink global economy by 3% in 2020: IMF), I thought pairing it with a safe haven currency was appropriate. It’s arguable that it was the right call or not, but without hindsight, I don’t think it was a bad decision.
Anyways, what do you guys think of both GBP/CHF and AUD/CAD? Do they both have room to run higher? Let me know in the comments section below!
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