Weekly Binary Options Trading Briefing 12/31-1/7/2013 – Euro Posts Gains on the Year and Breaks a 2-Year String of Losses

Binary Options Trading Recommendations for the upcoming week –  Market Information and Trading Tips

 

Happy New Year for All Traders out there!

Into the end of 2012, some clear trends emerged in the currency markets, with the  pushing lower against many of its major counterparts and the shared Euro currency snapping a losing streak that had set the tone for the last two years.  After hitting its lows in the middle of July, the EUR/USD posted strong rallies that were inspired by commitments from regional policymakers to support the value of the currency if debt-fueled negative sentiment led investors to sell the Euro in a drastic fashion.

 

        Ultimately, confidence returned as creditor nations (mostly situated in the north of the Eurozone) relaxed some of their austerity requirements and approved successive bailout plans for Greece.  The widespread commitment of the European Central Bank to enact stimulus measures and the dismissal of any suggestion that debt-troubled member nations would be forced to leave the monetary union was enough to convince traders that the Euro was a currency worthy of investment.  This helped pairs like the EUR/USD and EUR/JPY close near its highs for the year (above 1.32 and 113.50, respectively).

 

Reasons for a Continued Positive Outlook in 2013

        An additional factor that has been putting pressure on the Euro was the constant need for the central bank to reduce rates, until the base rate reached an all-time low at 0.75% (the Euro has been in use for 14 years).  Lower interest yields are bearish for a currency and these trends in policy making pushed the currency to declines of -6.5% in 2010 and -3.2% in 2011. 

 

But the ECB does not have much room to continue reducing rates and since the wider expectation calls for recoveries in manufacturing and consumer spending in 2013, there is little reason to sell the currency.  With the EUR/USD well off of its all-time highs near 1.60, there is a great deal of upside that should be seen barring any unforeseen changes in loan approvals or negative surprises in the general expectation for a continued global growth recovery. 

 

 

My Trading Recommendations in 50 words

 1.With the Fiscal Cliff deadline not being seen until trading starts next week, it is better to wait for the event risk to pass before entering into new positions.  A negative outcome could create volatility in risk currencies, however, and I will be looking for monthly CALL options in the EUR/USD if prices trade back to 1.3130. This longer time frame will allow the “dust to settle” if we do see a negative Fiscal Cliff outcome, and analysts will be forced to start looking at data releases for the next trend direction. 

 

2. Last week’s reduced volatility led the previous CALL in Gold to barely end the week in the money but the asset still represents the best hedge against a negative Fiscal Cliff outcome I will be looking to draw from the well once again and enter into monthly CALLS near 1650.  Weekly trades this period are too risky, given the proximity of the Fiscal Cliff deadline.

 

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