Both good and bad luck between my latest ideas in EUR/GBP and NZD/CAD. Let’s see which is which and how I’m adjusting my plans to manage upcoming risk.
Major Support Break on EUR/GBP?
Let’s first start with the bad and that’s no doubt my longer-term short idea on EUR/GBP. I originally wanted to go short on what appeared to be a bias in favor of Sterling over the euro, likely on the sentiment divergence between how likely the European Central Bank and Bank of England were to adjust monetary policy (i.e., hike interest rates).
The trigger for the short was a breakdown of the major support area around the .8700 handle, and I entered short orders there which were triggered on a retest after the breakdown.
Since the retest, there wasn’t much in terms of sellers taking back control. It did look like we’d get back to the downtrend after the ECB’s monetary policy meeting. There was no change and no hints of tightening so we did see pressure on the euro to give my trade some positive signs of success.
Unfortunately, it was the surprisingly weak U.K. first quarter GDP read the next day that had forex traders pressing the sell button hard on Sterling, and pretty much adjusting this trade for my by taking the market to my stop level of .8810 where my trade closed for a small loss:
Total: -110 pips / -0.50% on 0.50% risk
From a price action standpoint, it looks like the downward momentum is over with the fresh pattern of high ‘lows’ and ‘highs’. And given the weak business data that was released this week from the U.K., it looks like my stop saved me from what could be lots of pressure on the British pound for the next week or so as the idea of the BOE hiking rates slips away.
Overall, it was a great setup with a fundamental driver, but the storied changed quickly and I’m glad I had a risk management in place to limit my loss.
Support Break on NZD/CAD
Now for the good, which is that strong downside momentum in NZD/CAD. After adjusting my stop down to limit my risk and lock in a profit last week, the pair has made it all the way down to the previous major support area around the psychologically significant level of .9000.
NZD/CAD bears were likely supported this weak by the positive Canadian GDP read in February, a sign that the country is stronger in Q1 than the Bank of Canada thinks.
With this latest move and with the quarterly New Zealand jobs data coming up this week, I decided to lock in further profit by closing half my position at market (.9024) and rolling down my stop from the previous adjustment of .9235 to .9170.
This locks in a 0.33% gain on my closed half of the trade and a 0.26% gain on the remaining open position, or locked in 1.18:1 return-on-risk.
Going forward, I’ll wait and see what the New Zealand jobs data gives me and how the market reacts to it before decided my next move on this trade. Stay tuned for that update, and as always, good luck and good trading!
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