A Trade In Review

  • AUDUSD trade sets up
  • Little follow through
  • Small profit booked
  • Key event risk ahead
  • Euro and Yen in focus

LESS THAN SATISFYING - Wednesday ended up being a bit of a tease. I was looking to take a trade in either AUDUSD, USDCAD or the SPX500 and when the trade finally came, it didn't offer the follow through I was looking for. AUDUSD was the one that set up and after isolating the 0.7225 area as an ideal entry for a short early in the day, the market finally delivered into North America. I sold half my average position size at 0.7216 and another half right at the high of 0.7234. This gave me an average position size of 0.7225. When the market pulled back to 0.7216, I covered that portion of the trade and was left holding half from 0.7234. Everything looked great, but unfortunately, we just didn't get the follow through I was looking for into the close and so, I opted to book a small profit and exit the position.

SAFTEY FIRST - My fear with the trade was the resistance above at 0.7280 and possibility the market would look to push towards the level. If you take a look at the daily chart, you will see that 0.7280 is quite significant as it also has the potential of representing itself as a major double bottom neckline. And so, given my preference to always err on the side of caution, I took the small profit and moved to the sidelines. Aussie has since pulled back quite a bit into Thursday, but that's just how it goes sometimes. Perhaps some of you out there weren't as conservative as I was. :) The other charts I was looking at both showed the anticipated follow through as well, with USDCAD bouncing out from sub-1.3000 levels and the SPX500 pulling back after testing psychological barriers at 2000.

A small profit is still a profit. Via @joelkruger

STRATEGY - Looking ahead, it will be interesting to see if these risk correlated markets come back under pressure now as I believe they should. We could still see more upside here, but I don't believe this risk rally will extend much further. China is back from holiday and this is already making participants nervous in early Thursday trade. The market will now focus on today's central bank event risk with the BOE rate decision due along with the ECB and FOMC Minutes. I would say it's probably time to start looking at the Euro and Yen again. Both major markets have been exceptionally quiet in recent weeks and both are starting to show signs of an imminent surge in volatility. My strategy today will be to look to see if we get any wild moves in EURUSD or USDJPY and then look to see if I can fade these moves.

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