After some decent gains on both my EUR/USD and GBP/JPY positions, and an outlook of further weakness for both pairs, I decided to forego taking small profits to try to maximize my potential profit on both trades. Unfortunately, short-term sentiment has shifted on fresh catalysts for both pairs, taking me out off both positions in today’s session.
Support Break on EUR/USD?
A couple of weeks ago, I decided to roll down my stop on my EUR/USD position to 1.1075 ahead of potentially weak U.S. economic data to reduce my risk, but also add an additional short order (1.0920) and additional stop roll down in case EUR/USD continued it’s move lower.
The pair did continue lower to triggered my additional short position at 1.0920, after which I rolled my total position stop to 1.1025, locking in a 0.11% gain and increasing my max profit to 1.80%. Unfortunately for me, the 1.0900 area was the recent swing bottom as the Greenback fell in the past week on fading optimism in the U.S.-China trade story (at least up until today). So, my trade was closed at 1.1025, again with a locked in gain.
Total: +37 pips / +0.11% gain on 0.66% original risk
A nice return-on-risk but a disappointing trade overall given the length of time in trade. Also, keep in mind my original third short order 1.1250 wasn’t trigged despite the market being right there at one point. I should have added that third bigger position once the market started moving lower, somewhere around 1.1200, and probably added more as the pair went lower.
Looking forward, I’m still bearish on this pair and probably would re-enter today if there was a big meeting on trade between U.S. President Trump and Chinese Vice Premier Liu He going on tomorrow. The result of that meeting is likely to be a market mover, and I’m not too confident on which way that could be for the U.S. dollar for now, so I’ll look to hop back in next week if it makes sense.
Longer-term Downtrend in GBP/JPY?
I also tried to maximize my short GBP/JPY position after it went my way, much earlier than expected as Brexit rhetoric was pretty negative at the beginning of this week. I thought momentum would pick up soon as the odds of a no-deal Brexit seemed to have been on the rise and the trend lower in Sterling remained strong. I rolled down my stop to basically my entry price (133.70) and added another position with the same stop to then create a position with an average price at 132.55. With this adjustment, I reduced my max risk to 0.28% from 1.00%, and increased my potential return-on-risk to 2.08% from 1.37%.
Well today, we got comments from Irish Prime Minister Leo Varadkar that a Brexit deal could happen by the end of October after meeting with Boris Johnson. Sterling shot up on the news as expected as it was a big turn around from the deeply negative sentiment on the situation just a few days earlier. GBP/JPY was included in that move, pushing the market higher to my adjusted stop and closing me out at 133.70
Total: -115 pips average / -0.28% loss on 1.00% original risk
Looking back, I don’t regret the adjustment I made this week as it seemed like the right decision at the time with very high odds of a no-deal Brexit occurring. Sometimes, the unexpected happens and you gotta take the hit, and that’s exactly what happened today.
Looking forward, the Brexit situation could easily turn sour once again, but with this latest positive development, I think I’ll avoid any GBP ideas heading into the Brexit deadline on October 31st. If an opportunity does present itself, I may hop onto it very, very small.
Stay tuned for that update if it comes and let me know what you thought of these trades and how I handled them. Would love to hear your thoughts below in the comments section!
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