Another episode of “Both good and bad”, this time between my ideas in AUD/JPY and NZD/CAD. Which one got the boot and which is the gift that keeps on giving?
Shorting AUD/JPY on Resistance Retest
Let’s once again start with the bad, which is clearly my AUD/JPY idea. I shorted on my fundamental preference in the Japanese yen over the Aussie, and this is mainly on Japan posting some positive economic reads in the past quarter, while Australia continues to struggle with inflation, and throwing in a little bit of broad risk aversion sentiment over geopolitical fears.
Weak Chinese data was that catalyst that got me in the trade as AUD/JPY took a turn lower at Fibs / stochastic overbought signals, but a surprise positive Australian employment read and a surprise weaker-than-expected Q1 Japanese GDP read last week seems to have brought the bulls back in, along with U.S.-China trade war fears easing sparking risk taking in the global markets.
The market broke above the falling highs pattern, and after making fresh highs on Monday, I decided to cut out of this trade given the strong upside momentum. I closed manually (83.82) during the Monday morning U.S. session to limit my max loss.
Total: -162 pips / -0.41% on 0.50% risk
Cutting early turned out to be a good move as the pair made it all the way to my original stop level and then some. Global sentiment seems to be back in favor of risk, which means it’s likely this pair has more upside room to run. And with the positive Aussie jobs data and Japan’s GDP surprisingly weak, I’m going to stay away from AUD/JPY short for now and keep it on the watchlist.
Support Break on NZD/CAD
Now for the good, which is once again the gift that keeps on giving: the downtrend in NZD/CAD.
I’ve been short this pair for quite some time, and after already taking profits through a partial position closure and rolling down my stop a couple of times, I feel comfortable now with adjustments to maximize my profit potential.
After breaking below .8800 last week we got a quick bounce, and it looks like sellers hopped right back in because they defended .8900 like champs. With the pair turning back lower, I decided to add back a quarter of my original position manually (.8852), keeping my .9030 stop, and removed my max profit target.
These adjustments increase my max potential gain, which at current levels is now around +0.88% on 0.50% risk (1.76 R:R), and if the market goes all the way back to my stop, then I will still make 0.63% on my original 0.50% risk, or 1.13 R:R locked in.
Going forward, I’ll likely adjust my stop one more time next week given that the Bank of Canada monetary policy meeting is next Wednesday. This adjustment will lock in further profit in case the event/market reaction doesn’t go my way, and now that I’ve increased my position/removed my max target, my profits could magnify if all goes my way…we’ll see, right?
Stay tuned for that update, and as always, good luck and good trading!
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