Decided to close my short-term news trade play on EUR/NZD for a small profit after a mostly lackluster RBNZ event. Here’s a quick review!
EUR/NZD Straddle Play
Yesterday, I decided to setup a straddle trade for the anticipated Reserve Bank of New Zealand monetary policy statement. EUR/NZD price action was in consolidation mode, and given the big moves after the previous RBNZ statements, it made sense to expect something similar if the RBNZ surprised traders once again.
Well, this meeting was a lot more muted as the RBNZ gave traders what was expected, making no changes to monetary policy and keeping the rhetoric on the economy dovish. But the Kiwi did react by selling off after the statement, likely on the commentary that the rally in the New Zealand dollar would likely be a problem for NZ exporters.
This prompted the rally in EUR/NZD that broke the falling highs pattern and triggered my long position at 1.7500. And there was enough legs after the move to take the pair all the way up to 1.7578 before Kiwi bears ran out of steam.
Looking at the trade this morning, without a major surprise from the RBNZ and price action already stalling, I thought the odds were pretty low of getting another 200 – 300 pip move by the end of the session. So I decided to take the profit by closing the position down manually (1.7541) during the morning U.S. session:
Total: +41 pips / +0.12% gain on 0.25% max risk
Overall, this trade worked out well as the consolidation-breakout setup played out as expected and in terms of return-on-risk, it was a solid 50% on risk in less than a day. But it was on a tiny position so nothing to write home about, and I think in the future, I’ll up the risk in these scenarios where a central bank isn’t expected to make any changes.
Going forward, with risk sentiment leaning negative on rising coronvirus cases, if that scenario looks to be the driving for the next week or two, then this breakout looks like a solid swing long position. Stay tuned for a potential re-entry!
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