Market Recap & Outlook:
Last week saw plenty of key developments in financial markets. Comments out of the Bank of England were more hawkish than expected and supported a stronger British Pound. The biggest move as a result occurred in the GBP/AUD which resumed its advance while the GBP/USD initially spiked higher, but the semi-annual congressional meetings of US Federal Reserve Chairwoman Yellen confirmed the current stance by the central bank that interest rates will increase at some point in 2015. This provided enough reason for the US Dollar to advance and kept gains in the GBP/USD in check.
The Bank of Canada cut interest rates as expected which set the Canadian Dollar into freefall while the Reserve Bank of New Zealand is expected to cut interest rates this week down to 3.00%. This continues the divergence of global central bank policy makers as the Bank of England and the US Federal Reserve are aiming to raise interest rates while the Reserve Bank of Australia is expected to keep rates on hold together with the Bank of Japan and the European Central Bank. The Bank of Canada already cut interest rates and the Reserve Bank of New Zealand feels the need to cut interest rates further which shows a divergence of how the central banks view their respective economies.
The European Central Bank has increased its emergency funding for Greek banks by €900 million in an attempt to stabilize the uncertain environment as the EU approved a bridge loan to Greece in the amount of €7.16 billion. This allowed the ECB to continue to support Greece which can now repay its loan to the IMF. Capital controls are expected to remain in place while it is unclear if banks would open for business this morning. Greece is now waiting for a new bailout to be released from the European Stability Mechanism, but a standoff with the UK will need to be settled first.
Key Fundamental Data:
New Zealand – Performance of Services Index for June rose to 58.2 which translated to a steady output by the service sector index. This can be compared with the 58.1 which was reported in the previous month.
United Kingdom – Rightmove House Prices rose by only 0.1% in July month-over-month, but increased by 5.1% year-over-year. This represents a mixed picture of compared to June’s increase of 3.0% and 4.5% respectively.
China – New Yuan loan rose by CNY1,279.1 billion in June which came in above expectations for an increase of CNY1,050.0 billion and represents a strong increase from May’s new Yuan loans which rose by CNY900.8 billion.
Germany – Producer Price Index is expected to contract by 0.1% in June month-over-month and by 1.4% year-over-year after coming in flat in May month-over-month and posting a contraction of 1.3% year-over-year.
Canada – Wholesale trade sales for May are expected to come in flat month-over-month after posting an increase of 1.9% in April.
Currency Pairs on today’s Radar Screen:
EUR/USD – The EUR/USD has opened today’s session lower and continues the overall downtrend which has dictated price action in the previous trading week. The 50 Day Moving Average (DMA) has crossed below the 200 (DMA) which increase downward momentum in this currency pair. The Accelerator Oscillator (AC) shows a positive divergence which suggests a change in momentum is likely while the Relative Strength Index (RSI) confirms the positive divergence and also indicates that price action is trading in oversold territory.
Today’s Binary Options Trading Strategy: Call Option
• Currency Pair: EUR/USD
• Timeframe: H1 (Hourly Chart)
• Binary Option Trading Recommendation: Seek binary call options on dips below 1.0830
• Upside Potential: The upside potential for this binary call option is 360 pips to 1.1190
• Downside Potential: The downside potential for this binary call option is 130 pips to 1.0700
• Risk/Reward Ratio: 2.77
USD/CAD – The USD/CAD has been faced with the fallout from the interest rate cut by the Bank of Canada as well as hawkish comments out of the US Federal Reserve. The strong move to the upside has resulted in the formation of a rising wedge formation which is a bearish chart pattern. The 50 DMA is trading above the 200 DMA and indicates strong momentum. The AC confirms the advance, but the RSI suggests a potential change in direction as a negative divergence formed while price action is trading in overbought territory.
Today’s Binary Options Trading Strategy: Put Option
• Currency Pair: USD/CAD
• Timeframe: H1 (Hourly Chart)
• Binary Option Trading Recommendation: Seek binary put options on rallies above 1.2980
• Upside Potential: The downside potential for this binary put option is 280 pips to 1.2700
• Downside Potential: The upside potential for this binary put option is 120 pips to 1.3100
• Risk/Reward Ratio: 2.33
USD/JPY – The USD/JPY has formed a double top formation inside of its horizontal resistance level which could suffice to pressure this currency pair to the downside. The 50 DMA/200 DMA cross supported the advance, but the AC and RSI show a negative divergence and further support a price action reversal as the USD/JPY trades in overbought territory. This completes today’s best option trading strategies.
Today’s Binary Options Trading Strategy: Put Option
• Currency Pair: USD/JPY
• Timeframe: H1 (Hourly Chart)
• Binary Option Trading Recommendation: Seek binary put options on rallies above 124.000
• Upside Potential: The downside potential for this binary put option is 145 pips to 122.550
• Downside Potential: The upside potential for this binary put option is 35 pips to 124.350
• Risk/Reward Ratio: 4.14
Today’s Commodity Trade
Silver – Silver was faced with a spike in downward pressure which resulted in a capitulation sell-off in this precious metal. The 50 DMA has crossed below its 200 DMA last week which increase corrective phase. The AC has formed a slightly higher low as compared to its previous intra-day low which points towards a potential reversal while the RSI confirms that Silver is trading in extreme oversold territory which is not sustainable.
Today’s Binary Options Trading Strategy: Call Option
• Commodity: Silver
• Timeframe: H1 (Hourly Chart)
• Binary Option Trading Recommendation: Seek binary call options on dips below 14.700
• Upside Potential: The upside potential for this binary call option is 120 pips to 15.900
• Downside Potential: The downside potential for this binary call option is 50 pips to 14.200
• Risk/Reward Ratio: 2.40
Today’s Equity Index Recommendation
EuroStoxx 50 – The EuroStoxx 50 has enjoyed a solid advance, but a technical breakdown is likely to occur over the next few trading sessions. The 50 DMA is trading above its 200 DMA in a bullish crossover which has allowed price action to accelerate to the upside, but the AC was unable to confirm an extension of the move. The RSI already collapsed from extreme overbought territory and a further downtrend in this indicator should be accounted for. The downside potential in this equity index is far greater than any potential upside from current levels.
Today’s Binary Options Trading Strategy: Put Option
• Equity Index: EuroStoxx 50
• Timeframe: H1 (Hourly Chart)
• Binary Option Trading Recommendation: Seek binary put options on rallies above 3,660.00
• Upside Potential: The downside potential for this binary put option is 37,500 pips to 3,285.00
• Downside Potential: The upside potential for this binary put option is 4,000 pips to 3,700.00
• Risk/Reward Ratio: 9.38.
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