EUR/USD: Bullish retracement after false whipsaw
EUR/USD was vulnerable to fundamental influence this past week as European Central Bank gathered for the interest rate decision and economic statement. Binary options traders were mostly expecting this event and the price action was quiet and smooth without too much trading volume in the first half of the week. EUR/USD was hovering inside a tight sideways consolidation range of 20 pips approximately (four-digit quotes). After breaching the first yellow range on the downside, the pair was sliding as binary options traders were purchasing put options in accordance with expectations of dovish ECB.
Initially, the regulator’s decision was in favour of the bears, and put-option buyers dominated in the marker on Thursday. However, that changed in two hours after the rate decision. ECB President Mario Draghi hosted a press conference about future monetary policy in the region, and binary options traders change their sentiment immediately. As a result, EUR/USD jumped 90 pips in one single hour and continued the upside swing after that.
Technical indicators weren’t too efficient due to high impact from the fundamental and emotional side. However, Stochastic RSI worked well, showing reversal points when it was crossing its lines and getting out of oversold or overbought zones. Awesome Oscillator worked well as a confirmation technical tool when it was changing the colour of the histogram. Simple Moving Average with 21-hours period did not hold traders as the volatility was enormous.
The current technical sentiment is mixed with Stochastic RSI in oversold territory and rates below SMA21, which suggests further bearish action. Awesome oscillator printed red bars and the histogram is heading towards zero level dividing growth from decline. This might point to an additional demand for put options. However, things might change quickly as call-option buyers are still following the markets closely ready to step in at any moment. Therefore, traders should monitor technical indicators in the light of possible bullish reversal signals, especially if Stochastic RSI will breach the oversold threshold again.
GBP/USD: Bullish breakthrough
The British Pound surprised many binary options traders on Friday when GBP/USD surged 170 pips in one single day after hovering around almost the same level as the trading week started. What’s more, the recent daily and weekly close rate is above psychological round-figure resistance of 1.2500 dollars per pound, which might point to further appreciation of the pair. Sterling was also stronger versus the Euro and Japanese yen, performing a bullish breakthrough of crucial technical resistance levels.
Intraday technical sentiment remains extremely bullish after the breakthrough signal printed by Bollinger Bands last Friday. Recent rates stay in the upper side of Double-Bolli chart setup with the yellow BB (deviation 1, 21-days period) acting as the support range. Until hourly close rates remain above that support line, traders should continue buying call options as further upside pressure is likely. The second level of support - Bollinger Bands middle line, which is equal to both indicator - should limit possible bearish retracement. If that confirmed, binary options traders could continue the trading cycle of buying call options as the overall pattern will look like a bounce-by-trend formation. Otherwise, if bears managed to push GBP/USD close rates below the middle line during the correction, then further slide, if not a complete reversal is possible. In this case, it’s recommended to switch to the put-options mode for intraday trading.
USD/CHF: Sideways consolidation
The Swiss Franc finished the trading week almost flat versus the U.S. dollar and weakened versus British Pound and Euro. USD/CHF printed the most effective trading signal on Thursday after a failed test of resistance range 0.9940/50, which was the third one this past week. Williams %R oscillator and Commodity Channel Index went off the overbought zone simultaneously, confirming each other’s trading signal to start buying put options. The bearish action lasted till noon in London and reversed as binary options traders bought call options on the test of 0.9855 support level.
The latest upswing took both technical indicators to the upper side, promising possible bearish retracement. However, binary options traders should wait for a more clear signal from intraday patterns in the same way USD/CHF printed last Thursday. Until then, it’s recommended to stay out of the pair.
USD/JPY: Bullish continuation
One of the most sustainable performances noticed in the currency market was the Japanese yen’s decline versus the greenback and other major currencies. USD/JPY printed seven daily gains out of eight trading sessions, continuing its rally on the weekly timeframe with three consecutive green candlesticks after testing this year’s low at around 104.50 yens per dollar. As a result, USD/JPY closed the week above 108.00, which never happened in two months. The intraday performance was sustainable and robust, the pair had several corrections allowing binary options traders to restart the trading cycle of buying call options.
Ichimoku Cloud trend indicator worked best showing the depth of retracement. First support curve - Conversion Line (blue) - was showing short-term corrections. If the rate was breaching it with hourly close rates, then USD/JPY was testing the next support level - Base Line (brown). There was just one example when the pair breached Base Line support and headed towards the upper band of the Ichimoku Cloud. However, the buyers of call options stopped the pair from further decline, and USD/JPY continued the uptrend.
It would be reasonable to keep buying call options until the multi-level Ichimoku’s support breached and until the leading span has a positive surplus (green). USD/JPY is approaching crucial resistance levels on longer-term timeframes, thus traders should be cautious in terms of possible bearish retracement followed by long whipsaws and shadows on hourly candlesticks, which might be the first sign of large volatility to come.
NZD/USD: Bearish slide
The New Zealand dollar failed to continue the bullish retracement on the daily timeframe and slid back down. Call-options buyers tried to lift NZD/USD above the horizontal static resistance line at 0.6443 five times this past week, but all of the attempts were unsuccessful. Every time the rate was approaching that level, put-options buyers stepped in with heavy volume demand and pushed the price lower. As a result, the bulls had to retreat and NZD/USD dropped 70 pips toward 0.6377.
The best technical signal came from fast 14-hours Relative Strength Index, which edged above the overbought line for one hour and then dropped quickly, confirming the demand for put options. The level of 50% dividing the growth from decline was passed by the indicator’s line quickly without any bounces, and that was a signal to continue buying put options for NZD/USD. So far, the technical sentiment is negative, and the pair is set to decline further.