Entered AUD/USD at 1.0950 on 26 July. Exited July 26 at 1.1042. Result: +92 pips
Entered with no stop. Greatest open loss: 15 pips Greatest open gain: 110 pips
Sometimes a trade that is bought minutes or hours ahead of data looks whimsical but when it’s good, it’s often because it was set-up long beforehand.
I entered this trade because I became bullish Australian dollar after the RBA minutes on July 18 (my analysis here).
I became further convinced AUD/USD was going higher due to the breakout of the triple-top at 1.0789 on July 21.
I was waiting for a pullback but I knew that I wanted to be long into the decision. At the same time, it was risky to be holding USD positions because of debt ceiling talks and volatility in markets so I minimized those risks by buying hours before the decision on the bottom end of the recent range.
“We’re sure that the record of 1.1012 will fall,” we wrote.
What I should have known better: If I would have thought harder and prepared better, I would have realized what the break above resistance at 1.0789 was forecasting and been ready to buy on the pullback to 1.0800. I also left some pips on the table by covering perhaps too quickly. Eco data is always somewhat unpredictable, so I should have used a stop, even though I was watching the decision.
What I’m happy about: The fundamentals and technicals aligned and I jumped at the opportunity. What’s better than that?
Our best trades over the past month have been on Australian fundamental data so we’re going to continue to stick with what works by buying AUD/USD ahead of the RBA decision at 1.0970. That’s 110 pips below the record high and we’re expecting AUD to blow through that level by the end of the week.
Entered AUD/USA short at 1.0735 on July 4. Exited July 18 at 1.0627. Result: +108 pips
Entered with stop at 1.0800 (65 pips). Greatest open loss: 54 pips Greatest open gain: 210 pips
I entered this trade ahead of the RBA decision on July 4. I expected a dovish statement and explained why in a post RBA Will Remain on the Sidelines, AUD Vulnerable “The Australian dollar is likely to fall if policymakers do not take strong incremental steps toward future rate hikes,” I wrote. “The market is still hanging on to the idea that the RBA could hike in August but we see it as a long shot.”
I wanted to be short USD on July 18 so I exited the trade. Then the RBA minutes were more hawkish than I expected. I wrote this before exiting the trade RBA Minutes Disappoint Doves “What sounded like worries about employment and growth in the statement, read more like a simple adjusting of time frames in the minutes,” I wrote, noting that a high CPI reading late in July could put rate hikes back on the table.” Later in the month I used this perspective and I made money on AUD/USD longs.
What I should have known better: Not much. I could have booked a nicer profit on July 11 but I wasn’t prepared (see my trades in NZD/JPY and NZD/CHF for more).
What I’m happy about: This is what I do best – trades based mostly on fundamentals with some technical underpinnings. I entered the trade ahead of a fundamental event and left the trade as soon as the fundamentals changed. I also didn’t get shaken out by the nearly 300 pip rally on July 11-12.
It’s getting more difficult to avoid insults and hyperbole when describing the debt ceiling imbroglio. Surely you haven’t stumbled here looking for a recap of the day’s news so I’ll spare you the exercise save for a few thoughts. 1) On Tuesday it actually appeared that debt ceiling talks were moving backwards. 2) the real deadline is around Aug. 15. 3) We estimate the likelihood of a downgrade from S&P, Moody’s or Fitch at 70%. 4) the US looks increasingly to be on the precipice of another recession.
We remain short USD/JPY. We booked a 120 pip profit on the first leg of the trade and we’re up 51 pips on the second leg (entered at 78.46). We’re moving our stop down to our entry on the second leg, ensuring that we’re now trading with house money. We really like this position right now and if we were a tad more greedy we would be adding to it. It looks to us like there might be a sharp breakdown below 77.75.
Our latest trade is in AUD/USD which is hovering around 1.0950. It’s going higher. Four days ago on Twitter (July 21) with AUD/USD at 1.0830, we wrote “Beautiful breakout in AUD/USD. That will be testing 1.10.” We’ve climbed 120 pips since then and we’re sure that the record of 1.1012 will fall. The catalyst is going to be a high Q2 CPI reading (above 0.8% q/q on the trimmed mean) today. We are buying AUD/USD asap with the announcement coming on Twitter via @FX_Button. We will hold it until the news turns better on debt ceiling talks.