It looks like the bears couldn’t hold the range on NZD/CAD as the Loonie fell on deteriorating trade developments. Closed my position manually yesterday; here’s a quick review.
Short-term Range Play on NZD/CAD
Last week I was looking to play my fundamental bias favoring the Canadian dollar over the New Zealand dollar by scaling into a short position at the top of NZD/CAD’s two and a half month range. The pair did pop higher to trigger both of my short positions for an average sell price of 0.8439, but unfortunately for me, the market didn’t stop at the top of the range. The recent negative turn in the U.S.-China trade story damaged both global risk sentiment and oil prices in the last few sessions, which was ultimately a double whammy to the Canadian dollar.
After seeing the very strong round of buying to pushing NZD/CAD above the range on Monday, I decided to close the trade down manually at market (0.8526) to limit my max loss:
Total: -87 pips avg. / -0.63% loss on 1.00% max risk
In hindsight, it was still good setup in my mind as the fundies still favor the Loonie over the Kiwi, and the technical setup was solid. I think my mistake though was that there would be more cushioning from U.S.-China related volatility given that these are two comdolls with strong correlations to risk-on/risk-off moves, but I guess the Loonie is feeling the negative swings much more than the Kiwi is now-a-days. Overall, a good trade but I just didn’t get the outcome I was looking for. I’d do it all over again.
Looking forward, with reports that the ‘Phase One’ U.S.-China trade deal may not be completed this year hitting the wires and crushing risk-on sentiment away, I’ll likely stay away form long Loonies for now and focus on some risk-off setups for the short-term.
Stay tuned for that and thanks for checking out my blog!
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