Today’s Binary Options Trading Strategy:
• Currency Pair: USD/CAD
• Timeframe: H4 (Hourly Chart)
• Binary Option Trading Recommendation: Seek binary put options on rallies above 1.2375
• Downside Potential: The downside potential for this binary put option is 325 pips to 1.2050
• Upside Potential: The upside potential for this binary put option is 125 pips to 1.2500
The USD/CAD continued its rapid advance after the Bank of Canada surprised the markets with a cut in interest rates by 25 basis points down to 0.75%. This caused a massive move to the upside. The current phase of its advance emerged from its intra-day low of 1.1564 which was reached on December 31st 2014. The advance reached an intra-day high of 1.2419 yesterday on January 22nd 2015. A new horizontal resistance level has formed after the interest rate cut was announced.
Price action is currently trading inside its horizontal resistance level, but may push slightly above it during a false breakout. The USD/CAD is expected to trend sideways before attempting a breakdown and accelerated move to the downside. Binary options traders can take advantage from the anticipated breakdown with binary put options. Today’s binary options trading strategy suggests put options to be placed on rallies above 1.2375 for a risk/reward ratio of 1.0/2.60.
The USD/CAD has experienced a decrease in volatility during its rapid advance and the formation of its new horizontal resistance level. The low volatility trading environment may persist during the expected sideways trend, but the anticipated breakdown is likely to be accompanied by an increase in volatility as buyers will try to keep the current uptrend intact and extend the move to new highs. Sellers are favored to force a price action reversal with a breakdown which should take the USD/CAD back down to its next horizontal support level.
The first support level awaits the USD/CAD at its intra-day high of 1.2114 which was reached on January 20th 2015. This level represents the high recorded prior to the surprise move by the Bank of Canada which caused a strong spike higher. A breakdown below this level will take the USD/CAD to its ascending support level around the 1.2045 mark from where a further breakdown will guide this currency pair to its intra-day low of 1.1802 from where a double bottom formation may prevent an extension of the downtrend.
The following economic data out of the United States is expected to impact the base currency, the US dollar, of the USD/CAD currency pair:
Chicago Federal Reserve National Activity Index for the month of December:
• Expectations: A reading of 0.48 is expected for the month of December
• Previous Report’s Data: A reading of 0.92 was reported for the month of November
• Impact on the US dollar: The expected plunge in the Chicago Federal Reserve National Activity Index, one of the biggest regional Federal Reserve reports out of the US, is likely to apply downward pressure on the US dollar which favors binary put options in the USD/CAD currency pair
In addition the following economic report out of Canada is expected to impact the quote currency, the Canadian dollar, of the USD/CAD currency pair:
Consumer Price Index for the month of December:
• Expectations: A monthly contraction of 0.6% is expected for December, an annualized increase of 1.6%
• Previous Report’s Data: A monthly contraction of 0.4% was reported in November, an annualized increase of 2.0%
• Impact on the Canadian dollar: The anticipated accelerated contraction in the consumer price index may be overshadowed by economic data out of the United States and the move already witnessed after the Bank of Canada announcement; this favors binary put options in the USD/CAD currency pair