After a spike higher in AUD/CAD in early September to get me into a full position, the bears have taken back control on recent weak Australian data. Here’s a quick adjustment to reduce my risk ahead of Canadian data and renewed negotiations between the U.S. and China on trade.
Downtrend Bounce in AUD/CAD?
It’s been over a month since entering my first two positions (0.90000 & 0.9050) on AUD/CAD to play my fundamental bias in favor of the Loonie over the Aussie dollar, and since then it was mostly a snoozefest as the stayed in a range between 0.8900 to 0.9050 on what I believe was a battle between improving U.S.-China trade relations & risk sentiment versus net positive Canadian data strength in oil prices after geopolitical events.
But after rallying higher last week to trigger my final short position at 0.9100 (putting my max risk at about 1.00%), the bears came back out to play after today’s weaker-than-expected Australian employment update, which grew speculation of the RBA moving up the next rate cut to October. AUD/CAD fell in today’s trade to break the rising “lows” pattern, but seems to have stalled at the major psychological level of 0.9000.
We’ve got fresh potential catalysts ahead, starting with the latest read on retail sales in Canada, but the bigger risk to me is the renewed negotiations between the U.S. and China that started today in the U.S. If we see more positive developments in this story, it’s likely the Aussie would rally again, and while I have no idea which way this story could go, I’d like to reduce my risk but keep open my max profit target in case it becomes a non or negative factor.
With my full position on with an average price at 0.9062 and 1.00% max risk, I’ve decided to:
- Roll down my stop from 0.9210 to 0.9120, giving me a weekly ATR amount of breathing room at the moment.
- This takes my max risk down from 1.00% to 0.39%, while my max gain continues to be 1.6% for now.
I also may look to maximize my potential gain by entering another position/roll my stop lower once 0.9000 is broken if the fundamental picture continues to argue in favor of the Loonie over the Aussie.
Stay tuned that update and let me know what you think of this adjustment. Rolled down too soon? I should add to the position sooner? Or maybe I should just sit on my hands for now? Would love to hear your thoughts below in the comments section!
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