Decided to close both of my USD long positions for profit ahead of what could be a big, big event from the FOMC tomorrow.
Trade Review: EUR/USD Short at Resistance Area
In case you’ve been under a rock for a minute, the Federal Reserve’s Federal Open Market Committee (FOMC) started their two day monetary policy meeting today and will give their latest decision on U.S. monetary policy, as well as their outlook on policy and the economy, tomorrow at 7:00 pm GMT. And if you need to catch up on what we could see from the event, don’t miss Forex Gump’s latest write-up: What To Expect For The December FOMC Statement. It covers everything from recent Fed speak, a look at the data the Fed takes into consideration, and the tools used to show the probability of future policy moves.
This event could be pretty huge as a weakening global economy, trade wars and geopolitical risk, and falling markets have been putting into question what was not only a perceived guaranteed hike tomorrow, but an expectation of several interest rate hikes from the FOMC in 2019. If the Fed changes their tune to a more dovish tone as Forex Gump expects based on recent Fed rhetoric, or what would be a shocking interest rate hold, we could see the Greenback take a hit. I don’t want to take the event risk, so I decided to close my USD long starting with my EUR/USD short idea.
This is an extremely short lived trade as my short orders at 1.1400 were just triggered today, but with uncertainty growing on what the Federal Reserve may do with monetary policy in 2019 it made sense to close it to avoid turning this very small winner into a loser. I closed my EUR/USD short position manually during the morning U.S. session at 1.1370 for a very small profit:
Total: +30 pips; +0.10% gain on 0.50% risk
Not a bad return-on-risk for literally what was a day trade, and overall, if the FOMC event wasn’t going down tomorrow, this is definitely a position I would hold into the end of the year as I think the USD edges out the euro in so many ways from interest rate differential, to economic conditions and global risk sentiment. Stay tuned for a re-visit on this idea in the new year.
Trade Review: AUD/USD Short At Previous Consolidation
It’s been a couple of weeks since shorting AUD/USD at what was a previous strong consolidation area during the Summer, hopping in at market (.7338) and riding a surprisingly fast move down to a major support area around .7200. I decided to lock in some profits (closing half and rolling down the stop) once the support area held, and since then AUD/USD has gone no where as it continues to trade right around that .7200 level.
Given the same reasons above to avoid FOMC event risk, and the fact the market hasn’t moved in a couple of week, I decided to close the remaining portion of this position at market this morning (.7198) to lock in a profit.
First half: +125 pips
Second half: +140 pips
Total: +132.5 pips avg; +0.17% gain on 0.25% risk
The return-on-risk for this trade was actually pretty good for a two week trade, but because I started off with such small risk, I didn’t really take much advantage of the setup. Depending on what happens with the FOMC tomorrow and any geopolitical developments between now and the end of the year, I’ll likely revisit this pair for a short again in the new year if the driving themes and data still makes sense for a short play. Stay tuned!
With these trades closed out, I’ve got an empty book and it’s likely to stay that way for the rest of 2018…can you believe 2018 is almost over!? It’s been quite a year and I’m looking forward to looking back to do update my trading journal with an end of year review. So stay tuned for that and as always, good luck and good trading!
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