Monday started with the lack of demand for CALL options for USD assets in a low-volume trading session as most of the traders and investors were expecting the Federal Reserve to announce the interest rate decision and economic forecast. The low volatility on the market was also due to the holiday in several countries: South Africa, South Korea, China and Japan were off. EUR/USD options were trading in call-mode initially and the pair tested 1.1800 resistance on stronger-than-expected IFO business climate index (103.7 versus 103.2 expected). However, just a whipsaw left on the chart from that price action and EUR/USD closed the day flat. USD/CAD call options were on demand despite more positive Wholesales report than it was predicted by analysts. The main concern for Loonie bulls remains NAFTA deal which is still in the negotiation process with several deadlines postponed. The rest of the trading day was calm and quiet.
Japanese yen continued weakening versus the greenback amid more optimistic leading index in the country and BoJ Governor Kuroda’s speech. The policy maker confirmed the soft monetary policy by the regulator due to the lack of inflationary pressure. Supportive measures for Japanese exporters give a lift for the risk appetite and safe-haven yen keeps trading in the put-mode in such environment. The economic calendar was almost empty in the European trading session, however, the single currency managed to rise versus the U.S. dollar, but the demand for EUR/USD call options was limited due to the lack of volume. The United States were reporting data from the Housing sector which was published in line with the expectations. Much more important CB consumer confidence showed a positive surprise in September (the final reading of the index was published at 138.4 level while 132.2 was forecasted; August number was revised up as well). The FOMC started its two-day meeting.
Call options for New Zealand dollar had an additional demand from the market players as the country trade balance was not so ugly as it could have been and business confidence showed some sort of the recovery in New Zealand. NZD/USD traded in call-mode throughout the Asian trading session. The British pound was under the selling pressure after the Gross Mortgage Approvals reported slower-than-expected figures with the total number of 39.4K in August 2018. Anyway, the majority of traders were expecting the Fed to announce the interest rate decision and even New Home sales in the U.S. did not have much of the impact during the low-volatility trading session. The things became opposite at 7 PM GMT and the quotes became crazy as hundreds of thousands of traders were rushing to jump into the outgoing train with the greenback on board. The reason was simple: the U.S. Federal Reserve published its hawkish statement regarding the economic outlook and the need for another rate hike in December 2018. More tightening is on the table in 2019 as well. The greenback soared across the board, surging for 0.8% in the 12-hours bullish run across the board.
Thursday continued with almost the same pace and the same direction. USD/JPY call options rallied due to the positive news from the U.S. - Japan trade negotiations which are keen on protecting Japanese exporters from Trump’s sharky tariffs. Nikkei index soared to all-time highs on that news as well. In contrast to that, bad news came from Italy and EUR/USD put options were dominant in the market. The reason is that Italian populists’ government has approved the budget deficit at 2.4% of the GDP which is much higher than it was forecasted by economists. Moreover, analysts are concerned that some of the figures might not be real, especially when it comes to the income sectors. Italian equities collapsed and government bond yields soared as the result. EUR/USD bears took the market under control on that news. A new wave of call options for USD/JPY was noticed after the US GDP report. The headline number was in line with the market consensus but some parts of the report were positive. Three central banks speakers from major countries such as the Eurozone, Britain and the United States, did not stop traders from buying put-options for EUR/USD and GBP/USD, both currency pairs kept collapsing.
Friday was also ugly for major currency pairs, however, some of the assets were even stronger than the greenback. First of all, the crude oil market started to worry about the lack of any alternative for the Iranian supply, which has been decreased by 2 million barrels per day after the Trump’s aggressive external policy imposed new sanctions against the country. WTI crude price soared to $73.49 breaking through several important technical resistance. Call options are more likely for the week ahead as well. Some analysts forecast $90 till the Christmas and $100 at the beginning of 2019. Another surprise came from Loonie, as USD/CAD options were trading in a put-mode after Bank of Canada Governor Poloz underlined the need for another rate hike in the nearest future, ‘despite any uncertainties’. The greenback was strengthening across the board and Loonie price action came in contrast to the overall binary options market.