Yen bears seem to be on top of their game these days so I’m cutting losses on this AUD/JPY short trade before it hits my stop. Here’s what I learned from this setup.
In my initial trade idea, I hopped in a short position on a break-and-retest of a longer-term support area around 84.00. At that time, risk aversion was strongly in play as geopolitical risks hogged the headlines and favored the lower-yielding yen. In addition, the RBA acknowledged the weakness in the jobs market during their April rate statement.
This allowed AUD/JPY to keep tumbling in the days that followed, breaking below the 82.00 major psychological level and convincing me to enter another short position to press my advantage. However, the tide soon turned as traders booked profits ahead of the first round of the French elections and the pair gapped up after the results were announced.
I still held on to the trade for a bit, thinking that the weekend gap would get filled sooner or later, but it looks like bulls aren’t letting up anytime soon. With that, I decided to close the short position early at market (83.75) before the release of the Australian CPI, which is projected to show a slightly stronger read of 0.6% for Q1.
This allowed me to catch 20 pips on my original position and give up 210 pips on my second. In retrospect, I realized I shouldn’t have added another 0.5% position so close to a major event risk or probably should’ve scaled back my risk to just 0.25% on that one. Or maybe I should’ve closed when price dipped near my PT and just waited for a pullback entry. Anyway, here’s what I ended up with:
P/L: -190 pips / -0.41%
Given how market sentiment has been flipping on a dime these days, I gotta remind myself to think more short-term when it comes to managing my positions, especially since a lot of moves have been headline-driven rather than dependent on fundamentals. As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups.
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