AUD,NZD/FXWW News/JPY crosses/Trade Ideas

AUD/JPY: Balancing act between reducing risk for weekend and staying on risk-reward trade

I really like the risk-reward on being long of this pair. The technical set-up looks promising (double-bottom just above a major Fibo), the positioning set-up looks favourable (AUD shorts at significant levels), and the up-coming Australian election makes it highly likely that we will see short-covering kick in sooner rather than later.

But as always on a Friday, there is the nagging doubt about being long a typical ‘risk’ pair heading into the weekend. However unlikely it might seem, there is always the possibility of an opening gap lower on Monday when risk management is out of my control. That’s never a good position to be in. If in doubt, I always reduce ahead of the weekend.  Even if I have to buy back in 30/50 pips higher, it’s worth it just to keep control of my position. With a bit of luck we will see some sort of a rally over the next 12/15 hours which will allow me to book some healthier profits.

  1. I posted the comments below on the Asian Open thread, but I’ll pop it in here, being more recent.

    Hi Sean,
    You may be right about the AUD rallying in response to a change of government. You’ve got a lot more experience than myself with these things, after all.
    That said, it does seem a bit of a mystery to me why the markets would get too excited about an Abbott led government. This brief article in The Economist (I pinched the link from Forex Live) endorses Rudd mainly because he’s the least unappealing alternative (sounds like forex choices! lol). I’m not exactly enamoured with Rudd and Labor’s in a shambles, but looking at the alternative, I tend to agree with them on this one.

    http://www.economist.com/news/leaders/21584343-kevin-rudd-just-about-deserves-second-turn-lucky-no-more

    If there is a bit of election related short covering in the AUD, would it be because that’s simply what the market expects and it becomes a self fulfilling prophecy?

  2. Good point, Sean.
    However, being too careful can also bite you.
    Last Friday, I was short EURNZD.
    Going into the weekend, I was up 40 pips and thought it’s safe to update my SL to +1.
    Then, the weekend gap and the larger spread hit my SL right on Monday open and immediately went down again.
    I missed a big potential profit.
    It ain’t easy, is it?

  3. Hi Peter, you make fair point and really there is no difference between either candidate in terms of effect on the AUD. Nevertheless, its always been the case in my experience where the right-leaning candidate (Reps in US, Tories in UK, CDU in Germany) wins the election the ccy gets a bit of a boost albeit s/t. Plus when positioning is heavy one way, it will tend to reduce pre risk event

  4. Hi Sean, current situation reminds me a bit of you preaching long gbp/nzd couple months back))) I think I need to close my eyes and jump into it with some silly 300 pips below SL… Will assess it on Monday, and might try to time it a little bit, but I like the idea of trading your conviction)))) cheers

  5. I just think the R/R is ridculously good at current levels. 200 pip downside risk but if this npair turns then I can easily imagine USD/JPY 100+ and AUD/USD back near .9300?

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