The driving themes have changed a bit for both the euro and the Kiwi, so I feel like I had to change my stance on EUR/NZD. This led to making a stop-and-reverse move on EUR/NZD. Check it out!
EUR/NZD Momentum Higher
In mid-August, I decided to play the momentum higher in EUR/NZD, going with the driving themes of improving European data / European stimulus deal versus speculation of negative interest rates coming to New Zealand. I thought a lot of that was priced in so I decided to scale into a long position, starting with a nibbler at market (bought at 1.8140 with 0.33% risk) and then additional buy orders if the pair pulled back.
Since then, the pair has pretty much traded sideways, triggering my second order at 1.8010 with another 0.33% risk along the way and moving into a small profit. But this week, the pair seems to have picked up selling momentum, likely on a combination of events from both the Euro area and New Zealand.
For the euro, last week’s disappointing European business sentiment data and Brexit headlines (EU’s Barnier says little progress in latest talks with UK) may have sparked negative vibes for the common currency. And this week, the idea of negative rates from the RBNZ down the road has drawn concerns from bank economists, likely toning down the bearish bias a bit on the Kiwi dollar.
These are pretty fresh catalysts, so it’s likely this pullback in EUR/NZD may have legs for the next week or two as long as there are no outside surprises, including from this week’s meeting of central bankers at the Jackson Hole Economic Symposium. Also, these themes have been running all month, so it’s likely traders were bound to take profits off now that we have contradicting stories.
So, with all that, I decided to catch the potential reversal lower by closing out my long position and opening a new short position. Here’s what I did:
Closed long position manually at 1.7927 for -0.27% loss.
Opened short position at market (1.7927), max stop at 1.8260 with 1.00% risk, max target at 1.7200
So, I’ve got a new trade on and I’m only risking 1.00% of my account, and as of right now, I’ve got a solid potential return-on-risk of over 2.18:1 . I plan on adding to this trade/rolling down my stops if the pair drops lower. And of course, if the story changes for either currency, I’ll be sure to cut the trade away quickly and move on to the next one.
Be sure to manage your risk and avoid overexposure.
What do you guys think? Are you long or short bias after these new developments? If so, did you stop-and-reverse as well or are you still waiting on the sidelines? Let me know in the comments section below!
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