I got caught in the middle of a “buy the rumor, sell the news” situation on this AUD/NZD short trade, as the Aussie quickly recovered after the RBA rate cut. Here’s how my trade turned out.
I tried to catch a pullback to the descending trend line on the 1-hour time frame after the RBA announced its decision to lower interest rates by 0.25% this week. As I’ve mentioned in my trade idea, the announcement brought the pair below the 1.0500 key area of interest so I thought it had enough bearish momentum.
However, traders started booking profits quickly as the decision came in line with market expectations. Not even the 6.6% rebound in GDT dairy prices for New Zealand was enough to support the Kiwi against the Aussie then, as the ANZ commodity prices index released later on showed a slump from 3.7% to 2.0%.
With that, I decided against adding to my short position on a higher pullback, choosing instead to close early when price seemed unstoppable in its climb past the 1.0600 handle. I managed to trim my loss down to 0.21% from the initial 0.25% that I’ve risked and from the total 0.5% I was planning on putting on the line. Whew!
Here’s what I ended up with:
P/L: -250 pips / -0.21%
Now that the BOE also joined the rate cut bandwagon, expectations for an RBNZ rate cut resurfaced, driving the Kiwi much lower across the board. Even though I’m a bit bummed out about the loss on this setup, I’m gonna give myself some credit for making the necessary risk adjustments and for reducing my downside.
Think I should shift to a short Kiwi position from here? As always, I enjoy getting your feedback on my ideas!
Other Popular Articles:
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.