Now that we’ve got past a few key economic events and the markets making some moves, it’s time to make adjustments to two of my latest ideas on USD/CAD & EUR/AUD.
Adjustment: Uptrend Momentum In USD/CAD
Last week, I made a quick adjustment to my open long USD/CAD position ahead of the Bank of Canada’s monetary policy meeting, expecting a rate hike and possible short-term Loonie rally.
That’s exactly what we got as the BOC hiked as expected and a Canadian dollar rally did occur, but it was pretty short lived, likely due to oil weakness, broad U.S. dollar strength and possibly profit taking after the event.
The Loonie rally wasn’t enough to hit my additional buy order at 1.2900, and with it looking like the odds of 1.2900 retesting very low, I decided to make a quick adjustment to better position myself if USD/CAD continues to rally higher and cut my trade quick if it doesn’t. Here’s what I did:
- Closed buy order at 1.2900
- Rolled stop loss order higher to 1.2980, just below the recent swing low and major psychological level
- Watching for break of previous swing high (1.3400) to add buy orders
My risk on the open position is now a tiny 0.15% and my potential gain is still roughly 0.76% at my max target of 1.3700.
With buying support at 1.3100 coming in, I’m feeling good about this trade, and we’ve still got a busy July ahead (most notably Canadian CPI & Retail sales data, and U.S. GDP data) that could provide enough volatility to get the pair higher. I’ll keep a close watch on those events and price action, so stay tuned for any further adjustments that may be needed on the fly.
Short-term Event Trade On EUR/AUD
In the original trade idea, I talked about how the odds were good that we’d see a short-term rally in the Aussie, based on the likelihood we’d get some positive Australian employment numbers this week according to recent PMI data. And that’s exactly what we got as the government’s report showed a net increase of over 50K jobs vs. the 16K expected in June.
Unfortunately for me, Aussie bulls priced this in ahead of the event, pushing EUR/AUD further and further away from the top of the range, where I had my short orders at 1.5850.
The positive jobs data was enough to push EUR/AUD to the bottom of the range, and from there buyers took back control, likely on the broad commodity weakness that was seen in today’s morning London session.
With the event now behind me, there’s now no reason for me to keep this trade on as it was designed to play the Aussie jobs volatility, so I decided to close my short orders at 1.5850. No trade.
In hindsight, shorting right when I developed the idea would have been a great move as there was a still enough room to the downside to make it a worthwhile short-term trade, but my longer-term fundamental bias had me a bit cautious from going in at market. I’ll try to remember this the next time I do an event trade, which could be soon given the decline in volatility in the past few months forcing me to look for more short-term trading opportunities.
So, stay tuned for that 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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