No luck on my longer-term idea in NZD/USD as broad weakness in the U.S. dollar took this pair back above the major resistance area, closing out my position today. Here’s a quick review.
Long-term Short Setup on NZD/USD
Back in September, I decided to short NZD/USD at a major resistance area after resistance held and the pair began to turn lower. I wanted to play my expectations that the likelihood of a second pandemic wave could come(potentially creating a risk-off environment), coupled with expectations of an interest rate cut by the Reserve Bank of New Zealand may eventually lead traders to short this pair.
Since then, we have seen a substantial rise in coronavirus cases over the past two months across Europe and the U.S., leading to economy hurting lockdowns, most recently in the U.K.
The market also continues to expect the RBNZ to introduce more stimulus to spur growth in New Zealand, including the potential for negative rates to come some time 2021 if necessary.
But that did not lead to a fall in NZD/USD as expected, mainly due to broad risk sentiment staying mostly positive to support risk assets, supported by the idea of more stimulus coming in the U.S. And we just got a jolt of positive risk sentiment this week as the end of the U.S. election cycle took away some levels of uncertainty in the U.S., and the very, very positive news from Pfizer today on a 90% effective COVID-19 vaccine.
That was the nail in the coffin for my trade that took NZD/USD beyond the strong resistance around 0.6800 up to my stop at 0.6850 to close out my trade for a small loss:
Total: -308 pips / -1.00% loss on 1.00% max risk
So, no luck on this longer-term position as the market continues to ride higher on positive sentiment despite the global pandemic. Traders and investors continue to remain positive on getting beyond this terrible situation, especially with good news on that front, which leaves me leaning towards risk-on ideas for the rest of the year.
Stay tuned for potential new ideas with that bias 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.
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.