› Weekly Binary Options market review October 8 -12

Weekly Binary Options market review October 8 -12

A great example of how different sectors in the binary options market are related to each other was the second trading week in October. Without any significant economic reports, without any major monetary officials speaking last week, financial markets suffered a hard hit which came from U.S. equities. Major stock indices fell sharply, eliminating multi-months gains from the bullish market. The price action was very similar to February this year, as PUT options dominated among traders’ sentiment. So, S&P500 lost 3.8% of its value, NASDAQ 100 plunged for 2.7% and DJIA 30 benchmark declined by 4%. Friday’s recovery eased some of the worries a bit, though traders started to talk about the bear market to begin. One single daily sell-off on Wednesday was the third worst daily performance in history. That situation had a strong influence on the currency market as well. So, binary options for the U.S. dollar versus the vast majority of its peers traded in PUT-mode. Several high-risk assets even gained despite the dollar’s weakness and risk aversion across the board. British Pound, Japanese Yen, Euro and South African Rand were leading the strength. NIKKEI 225, DAX 30, CAC 40 and FTSE 100 - all indices finished the trading week in red.

Monday did not promise anything scary as what happened afterwards. Asian trading session was rather quiet with Japanese traders off fro the National Holiday. However, the Japanese Yen gained strength, pushing USD/JPY lower to 113.27, as traders preferred the move back to safety on falling stock indices. In contrary, EUR/USD started the trading week with the dollar’s strength, weighing on PUT options for the pair. German Industrial Production report came in softer-than-expected, declining by 0.3% in August (a growth of 0.4% was forecasted). French BTF Auction did not add any optimism for the single European currency as well. Canadian markets were closed for Thanksgiving Day, however, the Loonie was trading on a bullish bias. The economic calendar is the United States was completely empty on Monday, so binary options market was watching closely the equities’ price action. CALL options were in favour of DXY during New York session.

French BTF Auction
Source: Alternative Economics


One of the largest moves was noticed for all sterling pairs on Tuesday despite the lack of any important economic data in the UK. Brexit hopes were fuelling investors’ optimism and traders were rushing to buy CALL options for GBP/USD, GBP/AUD and GBP/NZD. That price action was accelerated right after the UK - EU negotiators reported a promising progress in some crucial issues about the Brexit deal conditions. Both sides are interested to finish the saga till November and get the deal done by that time. One more supportive factor for the British pound came from Bank of England, as Monetary Policy Committee member Broadbent expressed more hawkish views on the economic outlook in the UK. EUR/GBP kept falling due to disappointing German Imports and Exports figures which showed a monthly decline in August by -0.1% and -2.7% respectively. The overall trade balance was slightly better than it was forecasted by economists, however, EUR/USD continued its bearish slide towards 8-weeks low level (1.1432). The demand for USD/CAD CALL options was noticed after the Canadian economy reported soft Housing data. Although, the level of 1.3000 held the prices from further appreciation and PUT options came back for the pair, declining as low as 1.2932. The key event for the greenback was the short-term bills auction in the United States which confirmed the same tendency for the bond yields - investors are selling Treasuries amid expectations of much higher interest rates.

Slightly positive reports from Australia and New Zealand - Westpac Consumer Sentiment (1.0%) and Electronic Card Retail Sales (1.1%) - did not help Aussie and Kiwi. Both commodity currencies continued to trade on PUT-mode on risk aversion. Positive data from Japan - Core Machinery Orders (6.8% monthly and 12.6% yearly) - helped equities to recover some losses, as traders were buying CALL options for NIKKEI index. However, the recovery was limited due to investors’ cautiousness about the stock indices in the United States. USD/JPY was also trying to recover to 113.25 daily high levels. Monthly British GDP report was weak, stagnating in August. Manufacturing production and Construction output declined in the UK. The only positive report was Industrial production, picking up in yearly growth (1.3% with an upwards revision from the previous period). The initial market reaction was to buy PUT options for GBP/USD, and the pair slipped, losing some of the gains. However, buyers of CALL options stepped in with heavy buying, and most of the sterling pairs continued the recent uptrend. On the other side of Atlantic, traders were expecting for inflationary data in the U.S. Producer Price index slowed down its growth in September on yearly basis (2.6% versus 2.8% expected) and flat on monthly basis (0.2%, in line). Equities sold off. The greenback was also hit hard by that scary plunge in the stock indices. The only exception was USD/CAD, as CALL options were demanded due to another weak report from the Canadian Housing sector and falling Crude oil prices.

Thursday’s price action was the consequence of the events took place in the U.S. on Wednesday. Worldwide stock indices followed the economic locomotive and traders were liquidating long-term investments in high-risk assets. The greenback was hit the hardest. Even traditionally weak commodity currencies like AUD and NZD picked up the recovery, supported by demand for CALL options. Chinese yuan gained strength as well due to the Chinese Trade balance report which showed surprisingly strong reading, especially in imports. CALL options for EUR/USD currency pair were also dominant after some sort of increase in Spanish and French inflation monthly figures. European Central Bank published its Account of Monetary Policy Meeting and the regulator’s hawkish rhetoric was supportive for the single currency. The main weekly report which has been expected by the vast majority of traders this past week was the Consumer Price Index in the United States. The Federal Reserve Chairman Jerome Powell had frightened investors two weeks ago when he suggested an acceleration in the inflationary pressure and a possible aggressive reaction for that by the regulator. However, CPI numbers did not even beat the market consensus. So, September monthly CPI reported a softer growth for 0.1% (0.2% expected) while the yearly change was noticed at 2.3% levels (2.4% expected). Although, the fear-greed barometer turned too far on the left side and investors kept selling U.S. equities while the 10-year bond yields continued to climb further. All that negative sentiment was weighing on the greenback as well.

The binary options market calmed down a bit on Friday. Some of the falling assets found a local bottom and even recovered somewhat. The U.S. stocks rallied, leaving a room for optimistic analysts to predict that the bullish market is not over yet and we should expect further strength due to the upcoming earnings reports in the third quarter of 2018. An improving trade balance in the United States confirmed that suggestions. The trading week ahead will definitely be extremely volatile in the binary options market.


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