The bears were no where to be found around the previous major resistance area, allowing the bulls to break higher on NZD/USD to eventually take me out at my max stop. Here’s a quick review.
The Kiwi dollar has had quite a run lately, likely due to recent positive data for commodity prices as well as positive trade data from New Zealand. The Greenback on the other hand had a nice slap to the face last week thanks to the downside surprise and revisions in the most recent U.S. employment situation report. Everything combined, there just weren’t enough bears around to hold off the rally and eventual breakthrough of that previous resistance area around .7050.
I thought that the political worries and slowdown in China’s economy would spark enough risk aversion sentiment this week to bring down NZD/USD, but it looks like that’s not the case as the market continues to march higher. And the move was enough to trigger my max stop loss order at .7170 to take me out of the trade for a small loss.
P/L: -170 pips / -0.50% on 0.50% risk
In retrospect, I probably should have closed out as the market maintained above that previous resistance area, but I thought geopolitics and PMI data slipping around the globe would bring on another round of risk aversion sentiment (which usually benefits the U.S. dollar) to the markets. That wasn’t the case, lesson learned (again), and I’ll just have to do a better job cutting my losses down the road.
At any rate, it’s a small loss and I’ve still got my CAD/JPY short chugging along, which is trading nicely to more than cover this trade and then some. Stay tuned for updates there and for new ideas coming soon!