EUR/USD: Bullish reversal and breakout
The hourly chart below is divided into two parts. The initial phase of the trading week came along with the dominance of put options for EUR/USD. A clear horizontal resistance line was coming at the psychological level of 1.1000 dollars per euro as binary options traders were buying put options on every failed attempt to break it through. Also, there was a descending trendline, underlining the sequence of lower highs, which held the bulls from further upside action. On the other hand, the bears did not have too much development below the support level of 1.0950, and that weakness reflected in Parabolic SAR’s performance. Once its dots jumped below the price, an uptrend started. The key event was noticed on Wednesday when EUR/USD breached both resistance levels. Parabolic SAR and Stochastic RSI gave a strong signal to start buying call options and the bullish rally continued up to 1.1050 resistance. Although the recent technical sentiment changed to negative, and bearish swings are possible, the general direction should remain North. The crucial resistance range is at 1.1048/64, while the support is the same round-figure mark of 1.1000.
GBP/USD: Bullish acceleration
The British Pound surprised many binary options traders this past week. The initial performance was headed south and traders were buying put options as GBP/USD was testing the support level at 1.2200. However, that changed quickly after the pair surged north, and breached several crucial resistances with the first attempt. Of course, the main driver for such a dramatic price action came in from the fundamental side of things. British and European politicians announced a Brexit deal, which forced binary options traders to rush buying call options for GBP/USD, GBP/JPY and put options for EUR/GBP. The only technical sign that showed the bullish breakthrough was the trading signal from the Bollinger bands indicator. Since then, GBP/USD added more than 2.5% to the exchange rate. The upside action was limited only at 1.2700 as the buyer of put options stepped in with heavy-volume entries. As a result, Sterling bounced back down to the support curve of the double-bolli formation (see below). A deeper slide toward 1.2500 might happen, so traders should not start buying call options until the rate is below the BB middle line. Buying put options is dangerous as standing against such a strong uptrend is similar to suicide. Wait and see for now, but get ready to start the cycle on any bullish sign.
The pair was hovering in the same sideways consolidative range as previously. Although the bullish breakout happened on Thursday. The upside action was short-lived and limited as buyers of put options were active at around the parity between the U.S. dollar and Swiss Franc. As a result, the technical analysts noticed another failed attempt to breach the resistance of 1.0000 for USD/CHF, and the pair bounced back to the yellow range. Such a scenario gives a brilliant opportunity to trade in both directions, buying put options with the overbought conditions and call options on the bottom of the range. Williams %R and Commodity Channel index proved their efficiency of trading signals when lines are crossing the appropriate threshold. It would be reasonable to start the trading week buying put options, but keep in mind a potential reversal if both oscillators signalled oversold conditions.
USD/JPY: Bullish engulfing
The weekly chart of USD/JPY has a bullish engulfing candlestick pattern. The past weekend showed a bearish gap, but the bulls eliminated that selling pressure and lifted USD/JPY as high as 108.50 by the end of the trading week. Intraday technical sentiment changed on the four-hourly chart below when USD/JPY charted a bullish breakthrough and appeared above the Ichimoku Cloud. What’s more, the leading span confirmed the signal to start buying call options when it performed the bullish crossover. On the other hand, the upside rally is almost over at the time of writing as USD/JPY went below the support curve of Ichimoku Conversion Line. Such a bounce should point to a deeper retracement toward Ichimoku Base Line at 107.716. Therefore, call-option buyers should wait until the counter-trend action will be exhausted and start a new trading cycle, buying call options for USD/JPY if the test of the support was unsuccessful. Another scenario suggests a bearish breakout and correction toward the upper band of the Ichimoku Cloud coming at around 107.50. That’s a strong support level and it would become a tough nut to crack for the bears.
USD/CAD: Bearish retracement
The bulls failed to continue the upside swing for USD/CAD last week, and the cost of such a weak performance was cruel. The pair dropped -0.8% on a weekly basis, breaching several technical support levels. What’s interesting is that USD/CAD went back to the descending channel, which used to hold prices during the downtrend in September. The bottom of the channel was tested, and the pair bounced to the middle of the range on Monday morning. We’d stay out of the pair as it has a strong correlation with the price of oil, which is in an uncertain phase currently. On the one hand, oil bulls should keep buying call options for the black gold on the back of tightening tensions in the middle east and possible conflict between Saudi Arabia and Iran, leading to a shortage of global supply. On the other hand, the upside potential could be limited for the WTI Crude oil as the global demand is still weak. Regardless, the Loonie showed strength mainly thanks to robust macroeconomic data this past week, and USD/CAD reflected the overall risk-on sentiment in the U.S. and global equities. Those fundamental drivers should keep influencing the price action of USD/CAD, while technically speaking, the pair should remain in a wide range between 1.3200 (support) and 1.3300 (resistance). So buying call options on the bottom and put options on the top looks reasonable, as the trend’s direction is unclear so far.
USD/ZAR: Bearish slide
USD/ZAR reflected the market’s demand for emerging market assets and high-risk currencies. After testing the local top at 15.30 rands per dollar, call-option buyers gave up, offering a perfect chance for the bears to retaliate. As a result, USD/ZAR dropped almost 600 pips in a one-way bearish rally with a large number of 4-hourly candlesticks in the red. Given the fact, that the exchange rate is placed below Keltner channels, and Average Directional Index points to a comparatively strong momentum with the negative surplus, we suggest that the bearish rally would continue this week as well. Therefore, binary options traders should watch volatility to find out when it’s the best time to start buying put options for USD/ZAR.