We maintain our positive view on the US dollar. At the end of the year, US dollar will show strength against the low-yielding currencies such as the euro and pound. But our basic view implies a manifestation of the US dollar strength against the currencies of countries with emerging economies. Commodity prices will remain soft, so emerging markets and commodity currencies will show growth extremely difficult in such an environment.
For the first time in a long period, the US dollar was not the main currency we trade with. Of the eight open positions, the US currency was noted only in the AUDUSD and NZDUSD pairs. We bought a Put binary option on AUDUSD and Call – on the NZDUSD. We have refrained from positions opening on the US dollar currency pairs due to the uncertainty of the Fed’s interest rates policy.
Monitoring Stock Tendencies
Currently, the dynamics of the euro is made by the global risk environment. Over the last year, the single currency took a stable funding currency status, which naturally strengthens the market at the time of the sale of stocks and other risky assets. In general, the fall in oil and commodity prices is putting pressure on credit markets in the United States. There is no sign of reversal in the dynamics of oil prices. This suggests that pressure on the euro can now be limited. It is necessary to closely monitor the onset of the moment when the head of the ECB Mario Draghi will again be concerned about the inflationary situation. Then, the single currency is waiting for a new attenuation wave.
The euro was at the center of our attention throughout the past week. We bought 4 binary options on currency pairs with the single European currency, and all of them – for a variety of currency pairs. We used all the possible combinations of the euro and other currencies except for EURUSD because of the reason described above. Generally, our outlook for the euro was positive after the statements of officials from the European Central Bank, which led to the purchase of 3 Call options and one – Put on the single European currency.
Yen Is the Best among Big Ten
We maintain our bullish view on the Japanese currency, especially – in cross-rates. We do not expect the Bank of Japan to continue actions towards monetary stimulus. In addition, we are welcome the change in trend in the trade balance. The situation has reached bottom and the dynamics is rising now. Among the Big Ten currencies, yen most closely correlated with the stock market. This suggests that the Japanese currency may continue to benefit from the reduction in risk appetite.
We have formed predominantly negative view of the prospects for the Japanese yen last week, but the Bank of Japan on Friday has forced us to reconsider our position in relation to the Japanese currency. This did not prevent us to buy two options against the yen and one – in favor of the currency from the country of the rising sun.
Maintaining Bearish View on CAD
We stay among bears in the Canadian dollar, although it is recognized that at the end of the year the currency may experience some relief. Last comments of the Bank of Canada were neutral, but we expect a shift towards a softer position in January. This will put pressure on the loonie. Moreover, oil prices continue to set new lows. Canada will have to adjust to a new model of economic growth, which is also pressed national currency.
Call binary option on EURUSD currency pair became the only one that we bought on the Canadian currency. It was difficult to predict the prospects for the loonie in tandem with the US dollar, so we used a pair of the Canadian dollar and the euro for trading because of the confirmed positive outlook for the European currency.
Australian Dollar Prospects Worsen
Iron ore prices continue to show weakness. While it had a limited negative impact on the Australian currency. We expect the Aussie to start to catch up with the weakness in iron ore and will weaken. Housing prices in mining towns have also started to show weakness. This means that the Reserve Bank of Australia may through a short time to become more free to choose a step towards a rate cut. Global risk appetite remains weak and trading conditions – soft. We do not see any other way for the Australian currency other than the continuation of the decline.
Despite the deterioration of the Australian currency prospects, we bought two Call binary options on the Aussie against one – Put. Two upward patterns on the Australian dollar took their toll. If the trend in the raw materials market will continue to deteriorate, we will have to reconsider our view on the Australian currency.
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