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Well, that was quick! Sadly for my short AUD/JPY trade, the market reaction to the latest round of U.S.-China tariffs was actually a sigh of relief.

Short AUD/JPY Trade

Remember when I tried to catch the bearish momentum in that neat descending channel bounce last week, just before China fired their trade counterattack? It turned out that their retaliatory tariffs weren’t as harsh as many predicted, spurring a risk rally later in the day.

With that, AUD/JPY reversed course quickly and busted through the top of the channel before I even had a chance to cut my losses.

AUD/JPY 4-hour Forex Chart
AUD/JPY 4-hour Forex Chart

You see, I had based my trade setup on earlier reactions to the first couple sets of tariffs, and it seemed that the markets had priced in the move way ahead this time. Instead, the result was plenty of profit-taking and a bit of relief on indications that both parties might be giving each other some leeway.

Here’s the damage:

P/L: -100 pips / -0.5%

My main takeaway from this trade is that market reactions are no longer as straightforward as they used to be, likely because expectations come into play days or even weeks prior. I should’ve also been quicker on my feet when it comes to exiting the trade instead of leaving it to play out.

How do you guys think I should’ve played this better? As always, I enjoy reading your feedback since I learn so much from you, fellas!

 

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.