No luck on my latest short-term setup on GBP/NZD as the pair quickly changed directional sentiment with a big shift in global risk sentiment.
Here’s a quick review!
GBP/NZD Support Break
Last week, I decided to short GBP/NZD at market (2.0310) to play the prevailing risk-on bias (spurred off optimism as economies around the world were beginning to re-open), as well as Kiwi strength, likely due to New Zealand’s strong COVID-19 response.
There was also a technical argument in that a strong support area (around 2.0500 – 2.0550) was broken and seems to have been done so with momentum.
Unfortunately, that breakout turned into a fakeout, mostly on a big shift in risk sentiment to negative at the end of last week, likely due to the rising tensions between China and the U.S.
The Kiwi reversed its gains against the major currencies quickly, prompting GBP/NZD to rally higher and trigger my stop orders at 2.0550 to close my trade for a small loss.
Total: -240 pips / -0.50% loss on 0.50% risk taken
Since then, GBP/NZD moved up above 2.0700, right around the falling ‘highs’ pattern where sellers took back over to bring the pair to current levels around 2.050.
It’s tempting to put another short order on given the shift back to positive risk sentiment this week, but with the New Zealand jobs data and Bank of England’s monetary policy decision coming soon, I’m going in to watch mode on this pair for now.
If the fundamentals and risk environment continues to argue in favor of this trend lower in GBP/NZD, I may hop back in next week.
Stay tuned for updates and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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