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AUD/NZD has been a snoozer since my trade idea, but I’ve got a little profit.

With the RBA rate statement coming very, very soon, I’ve adjusted my trade to reduce event risk and create a near “risk-free” trade. Check it out!

AUD/NZD Trendline Break?

AUD/NZD 4-Hour Forex Chart
AUD/NZD 4-Hour Forex Chart

In early June, I decided to short AUD/NZD to play my fundamental bias favoring the Kiwi over the Aussie, and to play the impending potential catalysts, most notably the Aussie jobs data and the latest monetary policy decision from the Reserve Bank of New Zealand.

I expected the Aussie jobs data to disappoint, and the RBNZ to hold monetary policy and potentially be surprisingly optimistic given the good job NZ has done to combat the coronavirus.

Well, we got the terrible Australian jobs number (unemployment reaches 19-year high in May after loss of 227,000 jobs), but the RBNZ was still pretty dovish, making those to events a wash for giving my trade directional momentum.

And since then, it’s been a sideways market for AUD/NZD as traders price in cautious rhetoric (Low rates for years as economy meanders: Lowe) and negative economic updates (New Zealand GDP takes its biggest slide in three decades) against improving business and consumer sentiment sentiment data (New Zealand’s manufacturing sector showed some signs of recovery in MayAustralia’s AIG manufacturing index up from 41.6 to 51.5)

But overall, my trade has managed to make a profit despite the consolidation pattern (now +60 pips in the money), but with the upcoming Reserve Bank of Australia interest rate statement right around the corner, I’m going to adjust my trade to reduce my risk ahead of this top tier event. Here’s what I did:

Closed open short orders at 1.0775. 

Rolled stop lower on open position to 1.0705 to create a “risk-free” trade. Will continue to target 1.0500.

Expectations are for the RBA to hold, so the scenario to watch out for to determine my next move is for surprise dovishness from the central bank and for the Aussie to take a hit. If this scenario occurs, I’ll watch the support area around 1.0600 for a downside break and look to add to my position since I narrowly missed getting bigger during the small June rally.

If the RBA surprises with a lot of optimism and the Aussie rallies, I will look to close this position down and re-assess my next moves in AUD/NZD.

Be sure to manage your risk and avoid overexposure.

What do you guys think? Are you watching AUD/NZD for a potential swing position as well? Let me know in the comments section below!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.