The main event of the week was the ECB (European Central Bank) interest rate decision and press conference and therefore prior to it market as doing absolutely nothing. The EURUSD started around 1.1300, and Monday and Tuesday slowly moved to the upside almost hitting 1.140, only for Wednesday the whole move to be reversed and to enter the interest rate decision at the 1.1300.
The ambiguity continued after the interest rate has been announced in the sensed that EURUSD started to move to the upside on the no cut release and during the press conference it even made a new high when compared with the one from Tuesday, but not breaking 1.14 as sellers step in right after the conference ended. So powerful was the hourly candle to the downside that it took the stops below 1.13 quite fast leaving both bulls and bears with stops triggered. Difficult trading environment.
Cable In a Bullish Consolidation
Retail Sales on Thursday came lower than expectations but cable rallied on the news just like that. So far, the 1.44 seems to offer strong resistance. Brexit debate is still on in Britain with president Obama visiting the Kingdom and pledging for the importance of UK to stay in the EU. However, the closer we get to the June referendum, the bigger the volatility on the GBP pairs will be, so make no mistake trading this GBPUSD will be tough.
JPY Hurt by Bank of Japan
USDJPY recovered the 110 level after a rumor on Friday that the central bank, Bank of Japan (BOJ) intends to apply negative rates to some bank loans.
Whenever there is a round number like this 110 is, market is attracted by it and rarely is not coming back. In the case of the USDJPY, exactly that happened as this news out of Japan was enough for a pop above the level.
US Equities Going Parabolic
Dow Jones Industrial and S&P500 had a nice ride from the recent lows in the sense that are trading now close to all-time highs and the fact that they were able to do that despite the rate hike in the United States shows scope for further advance. To be honest, it is unlikely that they will reverse from here so continuation of the same trend should be expected.
Speaking of the Fed meeting, next week we’ll have the pleasure to see if rates are hiked again but considering the fact that it is not being followed by a press conference, chances for that to happen are really slim. As a consequence, equities should jump even more higher and all-time highs will probably being broken. Therefore, the plan for next week is to continue buying call options for the US indices, while buying calls for EURUSD and Euro pairs in general. As for the expiration date, it depends very much on the broker you are trading with and what the possibilities are, but choosing as much as possible as an expiration date should be the name of the game.
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