Market Attention to Turn Back to Macro Data Releases in Coming Week; Looking to Buy Gold Call Options at Current Levels

Binary Options Weekly Briefing 30.4-3.5

Safe haven assets were broadly lower on the week, with the US Dollar losing ground against most of the major currencies and Gold dropping to the bottom of its recent trading ranges.  The major macro economic data release of the week came on Friday, as the first quarter GDP report out of the US disappointed market expectations, showing a rise of only 2.2 percent on a yearly basis.

Equity markets were focused on other factors, however, as strength in corporate earnings helped push the S&P 500 to its highest levels in three weeks.  Some of the main headlines came from Apple, Boeing, Microsoft and Amazon, all of which released strong quarterly earnings that surpassed analyst estimates and kept markets supported despite continued negative headlines out of Spain.  The Dow Jones finished the week higher by 1.5 percent, with the S&P 500 gaining 1.8 percent and the Nasdaq gaining by 2.3 percent by Friday’s close.


US Non Farm Payrolls to Drive Risk Sentiment

This trend is unlikely to continue this week, however, as most blue chip earnings reports have already been made public and so market direction will be more heavily influenced by macro economic data as it points (or fails to suggest) a continued economic recovery around the globe.  Last week did see some positive releases, with housing data and consumer confidence coming in better than expectations but most of the attention this week will be focused on employment data.  The major release of the week will be the US Non Farm Payrolls report but before this we will also have manufacturing and consumer spending numbers to generate some short term volatility earlier in the week.

Last month’s Non Farm Payrolls disappointed markets and showed a rise of only 120,000 jobs for the month of March, which was roughly half of the three month average at the time of release, so it appears as though the strong momentum in the labor markets seen early in the year is starting to wane.  Because of this, Friday’s data could be a key indication for how markets will perform in May as investors have a harder time finding credible reasons to put money back into equity markets and high yielding currencies.

A weaker jobs number will likely generate more volatility than a positive number as many traders will open long positions will be forced to close out and reverse to the short side.  The big winners, if this scenario does wind up being the case, will be the safe haven assets, with gold and the US likely to reverse the losses seen during the previous week.


My Trading Recommendation in 50 words:

With the latest declines seen in Gold prices, I will be looking to enter into a one week 1640 call option in Gold, as prices are likely to be contained by the triple bottom seen at 1625 in the coming week.  Upside targets include a rise to at least 1700 before any meeting resistance but a break here could easily send prices $100 higher.