Decided to manually close out my longer-term short position in EUR/CAD as the global risk environment changed against me. Here’s a quick review!
EUR/CAD Support Breakout?
Two weeks ago, I decided to short EUR/CAD to play my fundamental bias favoring the Loonie over the euro and the break below the major support area around 1.4450 – 1.4500. And while the relative fundamentals haven’t really changed (Canadian data continues to show positive signs, e.g. Canadian corporate operating profits grew in the fourth quarter, building permits issued by Canadian municipalities increased 7.4%) the risk environment has changed big time as Coronavirus pandemic fears have shot up in the last week. The spreading of the virus as has accelerated outside of China, and that’s likely the reason we saw EUR/CAD turn higher in the past few sessions.
This is an unknown event to all of us, and with no way of knowing how long it will have this big an influence on the risk environment or how high EUR/CAD could go, I decided to exit this trade for now by closing manually (1.4503) this afternoon:
Total: -96 pips / -0.29% loss on 0.50% max risk
Overall, this is still a solid setup to watch from a fundamental and price action standpoint, but there are often times in today’s markets where that doesn’t matter if global risk sentiment is strong enough to over take all other inputs. I’m going to sit out for now in EUR/CAD, but I’ll definitely continue to watch and see if the downtrend can continue, and if Canada’s economy continues to look to outperform the Euro area.
What do you guys think of this trade adjustment? Let me know in the comments section below!
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