We still maintain our bearish view on the euro against the background of the expected increase in monetary policy differences, which should lead to a weakening of the single currency. In the long term, up to the ECB December meeting, markets likely will focus on comments to be made by the central banks. Previously, we have revised downwards our forecasts for the euro, but this risk appetite remains at a good level, the single currency continued to be used as financing for carry transactions.
Our trading on week November 9-13 marked with the opening of the three positions on currency pairs with the euro. We bought 2 Call binary options on EURGBP and EURUSD pairs and 1 Put binary option on EURJPY currency pair. Given that the previous week the euro to take part in about 60% of our operations, the results of last week can be considered a reduction in the activity of trading binary options on the currency pairs with the single European currency.
Growth in JPY Cross-rates
We see opportunities to strengthen the yen, which may look better than their competitors from the Big Ten. Expectations of additional stimulus measures by the Bank of Japan decline, which pushed the timeline to achieve the inflation targets. We expect an increase in economic growth from forthcoming publication of GDP data, which should contribute to the strengthening of the yen. In anticipation of the ECB December Meeting, we like to buy Puts on JPY pairs, but not against US dollar.
The Japanese yen traded last week with the same intensity as the euro. We bought 3 binary options on this currency, two of them were bought in favor of the yen and one – against. After the publication of data on the US labor market, we expect some correction in favor of the Japanese yen, so bet on its growth was quite justified.
Risks for Sterling Are Increasing
Dovish tone of the Bank of England, the tightening of fiscal policy and the impending talks about UK leaving from the European Union can keep sterling under selling pressure. GBPUSD is more sensitive to oil prices, so we need to watch closely the relationship of these assets. Employment report has been mixed. Wage growth has slowed down, which may allow Bank of England to keep rates low for a long time. This week traders will focus on inflation and retail sales data for October. We bought 2 binary options on the pound last week: 1 Call option – on GBPJPY currency pair and 1 – Call on EURGBP pair. Thus, our forecast for the British currency proved to be neutral for the previous week.
Long Positions in USDCHF Are Preferable Now
The divergence in monetary policy between Fed and ECB supports Call binary options buying on USDCHF pair. Prices are close to the March highs, a breakthrough that could provide an increase in the pace of the upward movement. Incentives of the central bank in December can trigger Switzerland’s rate cut in the coming months, if SNB sees the danger of increasing the growth rate of the franc against the euro (depreciation of EURCHF).
Put binary option on USDCHF currency pair was the only last week, in which Swiss currency participated. As in the case of the Japanese yen, we expected the correction in USDCHF pair after a significant increase in early November after the publication of important data on the labor market in the United States because of what we made a bet on the growth of the franc.
Use NZDUSD Growth for Puts
We prefer to use growth efforts in NZDUSD pair as an opportunity to buy Put binary options. Prices of dairy products do not show an increase and Reserve Bank of New Zealand expressed serious concern about it. RBNZ rate cut is not necessary for the continuation of the New Zealand currency fall, which traditionally decreases amid higher interest rates in the United States. Weakness in commodity prices should support our bearish view on the New Zealand dollar.
Our outlook on the continuation of the negative trend for the New Zealand dollar was embodied in the purchase of two Put binary options on NZDUSD and NZDJPY currency pairs. Commodity markets again began to show signs of price reversal down, so the New Zealand currency for a long time will feel the pressure of sellers.