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Forex Trade Adjustment: 2014-07-15

I’ve been in EUR/AUD for a while now, long enough for the picture to change.  Here’s what I’m seeing & how I’m adjusting my forex trading plan.

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

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

Since I’ve entered EUR/AUD short on a simple support break setup, the pair has moved mostly sideways.  This is partly due to a lack of new major catalysts, as well as the broad lack of volatility in all financial markets–not just currencies.   This has created a new picture and setup for the pair, but it doesn’t change my sell bias since the fundamental arguments haven’t really changed.  Despite today’s RBA meeting minutes signaling no rate hikes for the foreseeable future, I think the Aussie will continue to be more favored by the markets because of its higher interest rates, as well as Europe continuing to put out weak economic data.

Not that I see a new catalyst for a breakout lower at this time, I think this new chart will likely draw in sell orders below that consolidation (slight rising wedge?) if the market dips lower and the fundamental drivers stay the same.

So, I’m adjusting my plan by moving my second entry from 1.4700 to below the consolidation at 1.4430 and adjusting my total position stop to right above the Fibonacci retracment area and moving averages at 1.4670. This adjustment gets me into my full position with the same 1% risk and 200 pip stop from my new average entry price of 1.4470.  Actually, since this has been a positive carry trade, my actual loss would be less than 1% since I’m collecting interest, which raises my entry price.

My target continues to be a soft one at 1.4150, in that I’ll re-assess and adjust rather than take profit. That means I could take partial profit, add to my position or just trail my stop–it all really depends on the story and outlook when I get there.

And of course, there is the risk that this consolidation could lead to an upside breakout, but I wouldn’t be losing much since I’ve trailed my stop and it would be a loss on only half a position it was an upside breakout from current levels.

What do you think of my adjustments or on the pair itself? I’d love to hear you thoughts, so please leave a comment below.  Thanks!


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