The Reserve Bank of New Zealand took a lot of traders by surprise by holding off on interest rate cuts today, sparking a big, big Kiwi rally. With my fundamental argument invalidated for a long position in AUD/NZD, I decided to close my position manually for a small loss. Here’s a quick review.
AUD/NZD Range Support Ahead?
In case you missed it, the RBNZ surprised the market by holding the official cash rate at 1.00% (all of the major banks forecasted a 0.25% rate cut). The New Zealand dollar jumped on the news against the majors, and in terms of AUD/NZD, pushing the pair lower to trigger my buy order at 1.0710 and beyond.
With my big argument for the range to hold on AUD/NZD being that the RBNZ cuts now invalidated, I decided to close down my position manually (1.0669) during the morning U.S. trading session:
Total: -41 pips / -0.17% gain on +0.50% risk
From a fundamental perspective, the RBNZ holding makes the Kiwi a little more attractive than the Aussie longer-term on an interest rate differential basis, but in the shorter-term, the question now is whether it is enough to break the support area around 1.0675 – 1.0700. If so, I will look a potentially getting into a short position if the market is able hold below this area, and until then I’m hands off for now unless we see a U.S.-China trade deal that could bring in Aussie buyers to hold the support area.
What do you guys think? Did I close too early to see if the support area would hold? Should I have just shorted now? Let me know in the comments section below!
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