AUD/NZD hit my short entry level and immediately took a dive back lower. Now retesting a swing low, it’s time to make a move.
Trade Adjustment: AUD/NZD Resistance Retest?
In late February, I decided to put up short orders on AUD/NZD if the pair bounced higher to play my fundamental bias of the Kiwi out performing the Aussie. My trade was triggered on a pop higher after a positive Australian jobs report, putting me in short at 1.0475 with 0.50% risk.
Since then, the Aussie has been taking hits lower thanks to disappointing data (bank downgrade of Australian economic outlook, weak construction data), capped off by this week’s surprisingly weak read on fourth quarter 2018 GDP. The markets sold off the Aussie on this fresh news on the chances of the RBA cutting rates rose after the GDP data.
AUD/NZD is back to retesting the 1.0370 handle, which held as support mid-February. I think that after getting knocked down over the past week, Aussie bears could take this support area as an opportunity to take profits, likely bouncing the pair higher. At least, that’s what I did today by closing half my position at market (1.0379), plus I wanted to lock in a profit ahead of more top tier Australian data, the upcoming read on retail sales and trade balance. The retail sales data is the one that worries me as the expectation is for an improvement of 0.3% versus the previous read of -0.4%.
I also decided to make the trade “risk-free” by rolling the stop down on my remaining position to breakeven (1.0475). This locks in a roughly 0.14% gain on 0.50% risk (current gain of 0.29%), and creates a near “risk-free” trade as long as there is no gap higher above my stop (a highly unlikely scenario for now).
Depending on what happens with the Aussie data and the market’s reaction to it, I make adjust once again this week to either add back, keep it open as-is or close down the trade altogether. So stay tuned for that update and as always, good luck and good trading!
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