USD Pairs Trends – Full Review and How to Spot the Binary Options Trends
Forex trading has risen to vast popularity in the past decade as 24-hour markets and superior broker liquidity has attracted traders from all over the world. Traders are no longer forced to focus on traditional investments like stocks and bonds as a greater level of market flexibility continues to develop. The Binary Options is the latest example of this enhanced flexibility for traders. The “up and down” nature of Binary Options trading can take a lot of the guesswork out of how to successfully generate gains as prices need only close above your strike price (for buy positions) or below your price (for short positions). Savvy traders have looked to combine these two trends (Forex and Binary Options) to create a new type of trading strategy that requires relatively little market knowledge to sucessfully master.
Trading the USD Pairs with Binary Options
Many of these strategies involve the US Dollar (USD). As the world’s reserve currency, this is relatively unsurprising given that high levels of market liquidity mean lower trading costs and stable price movements. For example, trading costs in EUR/USD positions will always be less than what is seen in more commonly traded currency pairs (such as the NZD/JPY). In addition to this, market trends in pairs like the EUR/USD will be less volatile that what is seen in forex counterparts that are not denominated in US Dollars. If these types of trading conditions interest you, it makes sense to devote most of your trades to Forex pairs like EUR/USD, USD/JPY, GBP/USD, USD/CHF, and AUD/USD.
Forecasting Dollar Trends
Making consistently profitable trades in the US Dollar will require the ability to forecast the underlying trend in the greenback. Is the Dollar trading in a bullish (positive) context, or a bearish (negative) context? For options trading, this is the central question, as you will not know to take a buy or sell position if you do not know the underlying trend.
There are various ways to forecast direction in the US Dollar. When using fundamental analysis, it is important to assess the general state of the US economy. This can be done by watching Retail Sales reports, monthly jobs figures (Non Farm Payrolls), the unemployment rate, inflation, yearly GDP growth, or manufacturing productivity surveys. This might look like a complicated process but the most important thing to watch is how these statistics change the bias for interest rates at the US central bank (the Federal Reserve). Any evidence that leads investors to believe interest rates will rise in the US usually generates buying activity in the Dollar. If investors see reason to believe interest rates will be reduced, the US Dollar will likely move lower.
Indicators and Technical Strategies
Another approach in identifying the main trend in the US Dollar is to use chart indicators and technical analysis strategies. Trend line analysis can help you to visualize the underlying momentum in the market. Are prices making higher highs and higher lows? This suggests the US Dollar is in an uptrend and should be bought. Are prices making lower highs and lower lows? This suggests a downtrend is in place and that the US Dollar should be sold. Additionally, popular indicators like the Moving Average Convergence Divergence (MACD) or Relative Strength Index (RSI). These tools are useful for determining when the value of the Dollar has become too cheap (oversold) or too expensive (overbought). In these cases, the prior trend has likely reached its exhaustion point and the opposing trend is likely to take over. This information can be highly valuable when you are looking to establish binary options positions in the greenback.
How to Catch the Trend???
One of the best ways to catch the trend in the US Dollar (and make money doing it) is to combine technical and fundamental analysis. The combination of these strategies can give you a strong idea of where the US Dollar is likely to move next. If the Dollar is oversold on your chart indicator readings, a long-term bearish trend line is breaking, and the US Federal Reserve says that the economy needs higher interest rates in order to contain inflation or to avoid “overheating,” it is probably time to buy the greenback. This would been that the Dollar is looking bullish from all perspectives (both fundamental and chart-based), and if you buy the currency early on, it will be possible to catch the new trend before the big moves have been made. Of course the opposite scenario would mean that you would consider sell positions in the greenback.
Conclusion – The USD Trend Might be your Friend!
New trends in the Binary Options market place a high level of importance on Forex pairs, and the US Dollar in particular. For these reasons, it is important to know how to spot a developing trend (either bullish or bearish) in the early stages. This is the way to make money trading with the highest probabilities. In many cases, the broader market will determined by strength or weakness in the US Dollar, so this information is important even for traders that are not looking to establish positions directly in the currency. Binary Options traders will need some understanding of the fundamental forces and the price chart patterns that help determine the main trend in the Dollar, as this will help turn the odds in your favor when placing new trades in all asset markets.
Follow the USD Trend on our Forum – Visit USD Binary Options Daily Trading Thread!