Recent changes to the forex market environment has me making quick changes to my EUR/USD and AUD/JPY ideas. Check it!
Technically, this trade still makes sense as a short range play, but with the FOMC coming in a little more dovish than expected with their rhetoric on future rate hikes, the market is in full risk-on sentiment and bearish Greenback mode. Even before reaching the resistance area, I’ve decided that this may be a strong short-term catalyst that may take USD to new 2016 lows, so I decided to close my short EUR/USD orders at 1.1350 and 1.1500–no trade.
For now, I’m on watch mode with EUR/USD and if the area is retested and reverses, I will be quick to play my longer-term bias of U.S. dollars over euros because of monetary policy and economic data divergences.
With risk sentiment in bull mode as I mentioned above, I feel like I may not get the pullback I want on AUD/JPY to get into my full position. So, I decided to change it up a bit by looking to maximize my trade if the resistance level around 86.00 is broken. This could draw in buyers to push the pair up even higher, and if that does happen, I want to be in it with a bigger position.
So, I decided to reduce my risk by closing my open order to buy a half position at 82.00 and roll up my stop on my open half position to 82.00, bringing my max loss down to -0.35%.
I also put up an order to buy a quarter position at 86.75, with a max stop of 85.05. If this does get triggered, I’ll roll my stop on my first half position to 85.05 as well, reducing my max risk a bit further to -0.25%. At the same time, this increases my overall gain from 0.63% to 1.18% on -0.25% risk, which is not a bad reward-to-risk ratio as I will still target 90.50.
Of course, I don’t know where the market will take me tomorrow, but it always feels good going into a high probability situation with little risk, right? Nothing to do now but sit back and see if risk-on sentiment continues into the weekend. And if it doesn’t, I’ll be sure to adjust quickly to limit my risk.