AUD/JPY bulls did manage to get one more push higher, but were met with bigly resistance & a reversal soon after. With the BOJ coming soon, I thought it was time to make a quick adjustment.
Trade Closed: Short at Top of AUD/JPY Range
Since closing down half of my AUD/JPY position manually (82.87) & rolling down my stop from 85.80 to 84.80, global trade concerns continued to be the main driver of risk sentiment, which kicked into extra gear this week as more U.S. – China tariffs were announced.
With fears that the coming war is likely to affect the global economy and eventually the financial markets (mainly equities), traders went into full risk-off mode this week, selling high-yielders and riskier assets to return to safe havens like the U.S. dollar and Japanese yen.
With fears of China taking a hit, it’s only natural the Aussie takes it to the chin a bit, prompting my AUD/JPY short to move further in the money by more than another hundred pips to break the previous swing low and test the 81.00 handle.
With buyers and sellers balancing out around the 81.00 handle so far (4-hour doji candle formed), as well as stochastic indicating potentially oversold conditions, I decided to lock in this gift of momentum since geopolitical driven moves have proven to be short lived and can turn on a dime. I decided to close my remaining position at market this morning (80.95) for a profit:
1st position: +113 pips
2nd position: +305 pips
Total: +209 pips avg/ +0.58% or 1.16 R:R
Looking back, the only thing I probably should have done differently was to add back on to the position after the Bank of Japan announced no changes to their monetary policy. Doing so would have likely brought on a 2:1 return-on-risk versus the 1.16, and it was the right move given the mounting global trade war fears.
And with those fears still in play, I am looking to play AUD/JPY once again soon, but I’ll see how it handles this major support area and I wait to see how the trade war story continues to play out.
Trade Idea: Sellers to Return to NZD/USD
Last week, I posted up the idea for a short play on NZD/USD, base on the U.S.’ economic fundamentals outweighing New Zealand’s, the Fibonacci price pattern, and on the odds of risk sentiment flipping back to aversion mode thanks to geopolitical risks.
Well, it looks like sellers did come back, mostly thanks to the aforementioned U.S. – China trade war fears, pushing the market lower from an extremely tight consolidation range as traders flock to safe haven assets while selling the higher-risk or higher-yielding assets.
Unfortunately for me, that means I didn’t get in as the market never reached my orders at .7100. And with the market making those moves lower, and me not wanting to chase at this time, I’ve decided to close my open orders at .7100. No trade.
In hindsight, I probably could have jumped in after the consolidation break and still catch some decent pips, but I think already being short AUD/JPY had me holding back since I was already playing the risk aversion trade through that. I probably should have ignored that given the market drivers, but then again, in this news driven market, the story could flip just as quick.
Overall, it was a good idea but maybe a misstep in my entry plan, or at the very least, slow to adapt to the news flow. I’ll try to do better in the future, which should be soon as I’m working on fresh ideas in the Greenback and yen. Stay tuned!
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