On May 2nd of this year I initiated several currency positions and one was an AUDUSD short. The amount was 30,000 USD and the average cost was .7655. During the last few weeks the trade has moved significantly in in our favor. Last night price was within 80 pips of our target but snapped back to test .73. A stop is placed slightly above .73 where two thirds of the position will be protected. Consequently, a third of the position was covered this morning and it is likely the second third will be covered by the end of US trading assuming people continue to cover going into the RBA release this evening.
Here is why I kept a tight stop on the trade going in to tonight’s announcement:
Neutral Language – The language from the RBA when they cut the cash rate by .25 earlier this month was not super “dovish”. The board cut the rate then moved to a neutral stance. While Westpac forecasts another cut in August, we believe a cut will occur after that point but before the end of the year.
Sitting on The Top Of An HVA (High Value Area) – as the picture below shows price moved into the high volume area just below .73 and was being pushed out as of this morning. Under the circumstances it makes sense to cover a portion of the trade now in case an even more significant retracement occurs after the RBA minutes are released this evening. AUDUSD tends to snap with announcements and I’ve learned from experience that it’s better to cover a significant portion going into an announcement then to gamble profits away.
Protect Profit – I like profits and when I have fundamental and technical reasons to exit a portion of the trade that is deep in the green then I do so.