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Australia’s quarterly private capital expenditures report turned out to very bleak  (printed a 4.4% decline versus the estimated 2.3% slide), New Zealand data came in weaker-than-previous all week, and the euro is finding some strength lately, today on positive German retail sales data.  Overall, it’s been an active week for my open positions, and sentiment has shifted enough for me to make some adjustments.


Original Trade Idea: Downward Pressure on EUR/AUD?

EUR/AUD Daily Forex Chart
EUR/AUD Daily Forex Chart

I just opened up this position this week, but invalidating catalysts don’t care how long we’ve been in positions, do they? No they don’t, and as the saying goes, when the market changes I’ve gotta change with it. So, despite my trade still being technically valid, I think the bearish sentiment on Australia’s investment outlook will continue for a while.  So, I closed my short EUR/AUD position manually at 1.4360 since the fundamental stories have changed.

Total: -356 pips/ -0.74% loss

In hindsight, I still think it was a good technical setup and but didn’t work out thanks to fresh negative news from the Aussie that looks to be a short-to-mid term game changer.  And Greece still hasn’t defaulted, which could provide some short-term support for the euro for some time.


Original Trade Idea: Another Forex Short on AUD/NZD

AUD/NZD 4 Hour Forex Chart
AUD/NZD 4 Hour Forex Chart

Fortunately for my portfolio, I did have a Aussie shorts in the book with my AUD/NZD short, but unfortunately, the Kiwi is getting slammed just as hard (if not harder) than the Aussie at the moment. I’ll probably have to credit that to this week of weaker-than-previous New Zealand data (including trade balance, building consents, and business confidence data). This of course have economists and forex traders speculating a higher probability of a rate hike by the RBNZ, which has the Kiwi on its back heels.

This is a tug of war between weak monetary policy outlooks from two economies that are strongly tied together, so the outlook for this currency pair has gotten foggy to say the least.  I’m still in favor of the Kiwi because of the higher carry yield and it seems to be more resilient than the Aussie, so I’m keeping this trade on.  But with the uncertainty, I’ve decided to reduce my max risk by trailing my stop down around as much as that initial drop after the weak Australian data:

Adjusted stop from 1.1100 to 1.0950 to reduce my max risk from 1.00% to 0.50%. 

I will continue to target 1.0000 and if the market does convincingly go my way, I’ll look to add on a break of the major psychological level, 1.0500.  Stay tuned!


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