NZD/JPY Breaking Lower?
Last week, I was looking to play the negative shift on the New Zealand dollar as speculation of rate cuts were starting to be priced in after the dovish RBNZ monetary policy meeting at the end of March. In terms of price action, we saw a descending triangle form on the four hour chart, a pattern that tends to precede a breakdown, so I started with a nibbler position at 75.00.
But the market quickly turned bullish on positive on Friday after very bullish Chinese trade surplus and new loans data, essentially breaking above the descending triangle and invalidating the technical argument. Because of that, I decided to close the trade down manually (75.73) during the morning U.S. trading session:
Total: -73 pips / -0.20% on 0.50% max risk
Kiwi is a tough egg to crack right now with global risk sentiment generally swinging more positive lately as data improves, versus the potential for rate cuts ahead from the RBNZ. I’ll stay in watch mode on the Kiwi for now, but I may look to hop in again if the major resistance around 76.50 is retested and the market drivers at the time make sense for a short position.
EUR/CAD Bounce to Resistance?
At the beginning of April, I got bearish on EUR/CAD on the idea of potential weakness for the euro due to weakening economic data and policy stimulus from the ECB, and short-term bullish on CAD after a surprisingly optimistic speech from BOC Governor Poloz and the recent strength in oil.
But I did wait for a pullback to enter, picking the strong area of interest around 1.5050 for my first nibbler position. That level was tested and my trade was triggered, and for a second there, it looked like I’d get resistance and reversal right away. Unfortunately, that’s not the case as euro sentiment has improved in the last week (is the euro way oversold? no deal Brexit fears fading?) and the Loonie is losing some of its shine. The recent Loonie weakness is probably on the idea that rate cuts may come from the Bank of Canada, lately supported by weak housing data and disappointing employment report. This has all lead to EUR/CAD breaking above the 1.5050 area of interest, but still within my area of short interest up to 1.5200.
For now, I’m going to stay in this trade and see if the market can get up to the top of the range around 1.5200. More top tier data is coming from Canada and Europe this week, so odds are we could see a retest soon. If the top is retested, holds and reversal patterns form, I’ll likely enter my second nibbler position there and rework my exit points to stay within my max 1% risk. So, stay tuned for that potential idea and as always, good luck and good trading!
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