EUR/NZD managed to get up to my conservative orders to open up my short position, but with the negative risk environment outweighing the fundamentals, I decided to close this trade early to limit my loss. Here’s a quick review.
EUR/NZD Fib Short Play
A couple of weeks ago, I decided to short EUR/NZD to play both the fundamentals of New Zealand and Europe, as well as the broad positive risk sentiment environment due to the stimulative measures from China and signs of a vaccine in the works for the Coronavirus.I also thought it was a low probability the RBNZ would cut rates at the upcoming monetary policy statement. Fortunately, I was right on the RBNZ, but unfortunately, global risk sentiment quickly shifted negative this past week as the rate of spreading of the Coronavirus accelerated outside of China, adding to already growing fears of how much economic damage this situation will do to the global economy.
This has ultimately been a negative for EUR/NZD bears like myself, and with the odds of this scenario sticking around, as well as the market breaking above my technical argument of resistance at the Fibonacci retracement area on the daily chart above, I decided to close down the position manually early (1.7394) to limit my max loss.
Total: -244 pips / -0.40% loss on 0.50% max risk
Overall, a really good setup with both the fundamentals and technicals lining up for me, but as usual, risk sentiment was the main driver and simply shifted 180 degrees from where we were just two weeks ago. No choice but to close on EUR/NZD, but I will keep an eye on the pair and potentially hop back in if we see the situation improve (e.g., spreading slows down, a viable vaccine will become available, more government stimulus, etc.) and the fundies still make sense. So, that’s it for now, but stay tuned for updates.
And as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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