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NZD/CHF to Return to Downtrend?

NZD/CHF 4-Hour Forex Chart
NZD/CHF 4-Hour Forex Chart

A few weeks ago, I was looking to play the trend lower in NZD/CHF on a bounce as expectations for rate cuts from the RBNZ were pretty high, and geopolitical risk was high (favoring safe haven currencies), and global economic updates were more negative than positive. Since then, global economic data has improve in many cases, and a weak U.S. dollar lifted the rest of the major currencies, especially the comdolls, and it’s possible the SNB intervened in the currency markets as the franc was starting to get a little too hot during the risk aversion environment.

My plan was to scale into a short position as the pair bounced, and I got in at 0.6535 & 0.6590 with 0.50% max risk.  The bears did manage to hold 0.6600 for a little bit, but unfortunately, the broad risk-on environment and weak U.S. dollar was too much for the bears to hold onto that level, with NZD/CHF eventually rising up to my max stop loss at 0.6670 to close out my trade. 

Total: -101 pips/average / -0.50% loss on 0.50% risk

Looking back, as far as the initial analysis and trade plan, I probably wouldn’t change a thing. I was given a risk-off environment with a downtrending market to play with, so that was a high probability setup.  But what I could have done differently was as the environment started to turn more risk positive with the growing speculation of increased major central bank easing, I should have closed the trade down sooner to limit my max loss.

EUR/AUD Downtrend Bounce Ahead?

EUR/AUD 4-Hour Forex Chart
EUR/AUD 4-Hour Forex Chart

This week I put up a watchlist post on EUR/AUD to play a potential rise in volatility with top tier events ahead, the downtrending market, and the fundamental bias in which I was very bearish on the euro. I was looking for a bounce after a strong momentum move lower, but unfortunately that bounce was very short lived before the bears took control once again on EUR/AUD today.

With the market not likely to pop up to a much better short area around 1.6050 to 1.6100, I’m targeting a lower entry area as I still want to play my short bias on the euro ahead of some potentially bearish events next week, which I discussed in my watchlist post. I’ll be scaling into a short position from just above the current market up to the minor area of interest that has formed around 1.6025. My max stop will be one weekly ATR from my upper entry orders, and my initial target be one weekly ATR from my initial entry, where I will reassess the trade.  Here’s what I’m doing:

Short EUR/AUD with 0.50% risk at 1.5950, max stop at 1.6230, initial target at 1.5750

Short EUR/AUD with 0.50% risk at 1.6020, max stop at 1.6230, initial target at 1.5750

I’m only risking 1.00% of my account on this trade if both positions are triggered, and I’ve got a potential return-on-risk of around 1:1 at the initial target to start, but this is likely to turn into a longer-term trade for a bigger return if the euro continues to see pressure.

What do you guys think? Let me know in the comments section below!

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