USD Falls Before Important Reports Release
Srdan Sore
The recent decline in the US dollar is unfounded according to our opinion. Despite the fact that the probability of a rate hike at the June FOMC meeting recently declined, the last statement of the committee contained no hint of a more dovish position than the one that is already priced in. In fact, the... Read more
The recent decline in the US dollar is unfounded according to our opinion. Despite the fact that the probability of a rate hike at the June FOMC meeting recently declined, the last statement of the committee contained no hint of a more dovish position than the one that is already priced in. In fact, the FOMC left the door open for the decline in June, but the market sees a 20 percent chance of such an event. Thus, a further decline in the US dollar should be limited on the eve of ISM composite index figures for the non-production sphere and NFP publications. GBPUSD pair has just made a breakthroughs above month high set in late April – 1.4670 to extend its growth to 1.4690. The pair maintains the bullish tone. Sale orders established at 1.4700, a break will lead to testing the next resistance level of 1.4725. EURUSD returns to the previously set intraday high 1.1495. Resistance level of 1.1500 was again under attack of customers. There are sale orders in this area. Dealers have reported that the option barrier and protective sell orders concentrated around 1.1500 level. 1.1500 level also contains simple vanilla options. The next technical target is at 1.1500, where there is 1.618% Fibonacci projection of the movement from 1.1450. We opened 9 positions on currency pairs with the US dollar last week of the 16 in active trading mainly under the influence of technical factors. Our outlook on the prospects of the US currency was strongly positive and we bought 7 binary options on the US dollar's rise. However, despite the obvious fundamental and technical reasons for the growth, traders continued to sell the US currency before the end of the trading week. Enigmatic JPY Searches New Landmarks Until last week, we thought that the Bank of Japan should make everything that the investor has left no doubt about its readiness and availability of gunpowder in the locker. We believed that this can be done by shifting the emphasis on the expansion of the balance sheet, for example, by buying mortgages from banks. Kuroda in recent speeches hinted at such measures. However, the regulator has lowered the forecast on inflation and did not do anything. It seems to be determined to teach the markets remain patient. In other words, right now the path of nearest movement for USDJPY is south but we should keep in mind the potential of intervention by the Japanese authorities. If the strengthening of the currency will get out of control, the Bank of Japan may hold an extraordinary meeting for the adoption of countermeasures. In this case, Japan would violate an unwritten rule of recent years that monetary policy should be aimed at solving internal economic problems and investors are free to move the exchange rate where they see fit. We stuck in neutral overall forecast for the prospects of the Japanese yen, buying 4 Call and 4 Put binary options on currency pairs with the Japanese currency. On the one hand, the Bank of Japan pointed out bullish yen's prospects for traders in the near future, but we cannot forget about such an important technical factor as overbought status of the yen. SNB Pointed to the Undesirability of the Franc’s Appreciation The Swiss National Bank (SNB) is ready to further stimulate the economy and, if necessary, lower the rate of the Swiss franc, which is significantly overvalued, central bank president Thomas Jordan said. "We did a great job introducing negative interest rates and are ready to enter the currency market, but we have other monetary policy instruments in the arsenal", - the banker said. In January 2015, the SNB refused to limit, to which the Swiss franc could climb against the euro - 1.2 francs per euro - hoping to support domestic exporters, but this adventure complete failure, ruined as a result of a lot of foreign exchange market participants. New experiment of the regulator is the policy of negative interest rates. The regulator also intervenes in the currency market to prevent the strengthening of the national currency against the background of new stimulus measures from the European Central Bank. The interest rate on deposits in Switzerland currently stands at minus 0.75% per annum. According to Bloomberg analysts surveyed, the central bank may reduce the rate to minus 1.25%, if franc becomes more expensive. Since the beginning of 2015, the franc has grown by about 10% against the euro. We bought 1 Call binary option on USDCHF currency pair. Since the Swiss National Bank took a defensive stance, aimed at preventing the growth of the franc, we use this fact to open positions against the Swiss currency.

USD Falls Before Important Reports Release

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The recent decline in the US dollar is unfounded according to our opinion. Despite the fact that the probability of a rate hike at the June FOMC meeting recently declined, the last statement of the committee contained no hint of a more dovish position than the one that is already priced in. In fact, the FOMC left the door open for the decline in June, but the market sees a 20 percent chance of such an event. Thus, a further decline in the US dollar should be limited on the eve of ISM composite index figures for the non-production sphere and NFP publications.

GBPUSD pair has just made a breakthroughs above month high set in late April – 1.4670 to extend its growth to 1.4690. The pair maintains the bullish tone. Sale orders established at 1.4700, a break will lead to testing the next resistance level of 1.4725.

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EURUSD returns to the previously set intraday high 1.1495. Resistance level of 1.1500 was again under attack of customers. There are sale orders in this area. Dealers have reported that the option barrier and protective sell orders concentrated around 1.1500 level. 1.1500 level also contains simple vanilla options. The next technical target is at 1.1500, where there is 1.618% Fibonacci projection of the movement from 1.1450.

We opened 9 positions on currency pairs with the US dollar last week of the 16 in active trading mainly under the influence of technical factors. Our outlook on the prospects of the US currency was strongly positive and we bought 7 binary options on the US dollar’s rise. However, despite the obvious fundamental and technical reasons for the growth, traders continued to sell the US currency before the end of the trading week.

Enigmatic JPY Searches New Landmarks

bank-of-japan-buildingUntil last week, we thought that the Bank of Japan should make everything that the investor has left no doubt about its readiness and availability of gunpowder in the locker. We believed that this can be done by shifting the emphasis on the expansion of the balance sheet, for example, by buying mortgages from banks. Kuroda in recent speeches hinted at such measures. However, the regulator has lowered the forecast on inflation and did not do anything. It seems to be determined to teach the markets remain patient.

In other words, right now the path of nearest movement for USDJPY is south but we should keep in mind the potential of intervention by the Japanese authorities. If the strengthening of the currency will get out of control, the Bank of Japan may hold an extraordinary meeting for the adoption of countermeasures. In this case, Japan would violate an unwritten rule of recent years that monetary policy should be aimed at solving internal economic problems and investors are free to move the exchange rate where they see fit.

We stuck in neutral overall forecast for the prospects of the Japanese yen, buying 4 Call and 4 Put binary options on currency pairs with the Japanese currency. On the one hand, the Bank of Japan pointed out bullish yen’s prospects for traders in the near future, but we cannot forget about such an important technical factor as overbought status of the yen.

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SNB Pointed to the Undesirability of the Franc’s Appreciation

The Swiss National Bank (SNB) is ready to further stimulate the economy and, if necessary, lower the rate of the Swiss franc, which is significantly overvalued, central bank president Thomas Jordan said. “We did a great job introducing negative interest rates and are ready to enter the currency market, but we have other monetary policy instruments in the arsenal”, – the banker said.

In January 2015, the SNB refused to limit, to which the Swiss franc could climb against the euro – 1.2 francs per euro – hoping to support domestic exporters, but this adventure complete failure, ruined as a result of a lot of foreign exchange market participants. New experiment of the regulator is the policy of negative interest rates. The regulator also intervenes in the currency market to prevent the strengthening of the national currency against the background of new stimulus measures from the European Central Bank.

The interest rate on deposits in Switzerland currently stands at minus 0.75% per annum. According to Bloomberg analysts surveyed, the central bank may reduce the rate to minus 1.25%, if franc becomes more expensive. Since the beginning of 2015, the franc has grown by about 10% against the euro.

We bought 1 Call binary option on USDCHF currency pair. Since the Swiss National Bank took a defensive stance, aimed at preventing the growth of the franc, we use this fact to open positions against the Swiss currency.

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