Bahh! So much for that short-term descending trend line pullback! I got stopped out on my GBP/AUD forex trade when the commodities got slammed yesterday, but I’m looking to make pips off this new market theme with a fresh idea.
First things first, here’s what happened on my GBP/AUD short position. As I’ve shared in my previous update, I decided to add on a retracement to the 2.0700 area right around the 61.8% Fib and trend line. Things were actually going pretty well right until the end of the week… before the comdoll bloodbath took place yesterday.
Thank goodness I trailed my stop loss to my initial entry (2.0880) so my first short position was closed at breakeven while my second one was stopped out for just a 0.5% loss. It looks like the risk-off environment could continue to weigh on the higher-yielding Aussie for much longer so I’m not too bothered that I was taken out of this short trade.
I’m hoping to be able to catch some pips off this developing market theme, though, since it might keep comdolls in a downtrend for the next few days. The latest Chinese trade balance didn’t turn out so well, as it indicated a 3.7% slump in exports and a 5.6% tumble in imports, reflecting weaker demand for Australia’s raw material products. And now that iron ore prices are hitting record lows, the Land Down Under’s trade revenues could take a double-whammy.
Because of these factors, I’m keeping a close watch on this potential reversal forex setup on AUD/JPY:
I’ll post more deets up once I’ve set my entry orders, but I’d like to know what you think of this forex trade idea first!
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