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I’ve got a couple of long USD positions and with a potentially disappointing NFP update coming soon, I’m reducing risk a bit by locking in profits on AUD/USD.

Reduced Short AUD/USD Ahead of NFP

AUD/USD Daily Forex Chart
AUD/USD Daily Forex Chart

At the beginning of 2019, I decided to put a longer-term short position on AUD/USD to play my fundamental bias that the Greenback will outperform the Aussie dollar on economic and monetary policy divergences between the U.S. and Australia, favoring the U.S.

Since then, economic data has shown slowing growth around the world, but concerns are likely greater for Australia than the U.S., prompting analysts to forecast one or two rate cuts by the Reserve Bank of Australia this year. In contrast, U.S. economic data hasn’t been as dire as Australia’s and it’s highly unlikely that the Federal Reserve will cut rates year unless the situation in the U.S. really turns from slowing growth fears to actual recession fears.

So, I’m still very bearish AUD/USD, and in my last update I said I would watch for a break below the 0.7050 handle to possibly add to my position. But with a potentially disappointing U.S. employment report coming tomorrow, I’m going to reduce my USD longs for now by closing about half of my AUD/USD short manually (0.7022). And I’m rolling my stop down on my remaining position to 0.7160. 

Overall, this locks in a 0.25% gain on 0.50% risk, creating a “risk-free” trade given there are no gaps above my stop price. After the NFP report, I will look to add back to this position or possibly re-enter if I’m stopped out, as long as the data isn’t disastrous. So, it’s wait-and-see mode for now on AUD/USD until tomorrow…Stay tuned!

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