With my EUR/AUD short position making some nice gains, I’ve decided to close out the position to take a profit ahead of potentially negative Aussie data. Here’s a quick review!
EUR/AUD Downtrend Play
Two weeks ago, I decided to short EUR/AUD to play the trend lower, fueled by relatively bullish Aussie sentiment (“reopening theme”, improving Australian data) and a likely top in euro bullish sentiment ahead of the ECB meeting. I did so with expectations of a bounce ahead, so I decided to place short orders above the market at the Fib area.
It looks like the price action played out in my favor as the bounce did come, triggering both of my short orders at 1.6300 & 1.6495 before finding a top around 1.6585. And as hoped, the broad positive global risk sentiment continued on to send the pair back to the downside.
But we’ve got a top tier catalyst just around the corner in the form of the latest jobs update from Australia. Expectations are for another negative update (unemployment rate expected to rise to 6.7%), which could send the Aussie quickly lower. To avoid that event risk and losing my profits, I decided to close the position down manually this afternoon (1.6276):
1st Half: +33 pips
2nd Half: +228 pips
Total: +163 pips avg. / +0.58% gain on 1.00% max risk
Overall, this trade played out pretty much as I expected for the most part, with exception probably being that the momentum in the “reopening” theme slowed down in the past week. With fears of a second wave rising as cases rise around the world as economies reopen, odds are rising that we may see a shift towards negative sentiment pretty soon.
So, I think it was right to exit this trade fully for now, but EUR/AUD will continue to be on my watchlist, and if it makes sense to trade again after the Aussie jobs data and the upcoming European PMI data, I will hop back on the pair. Stay tuned!
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