EUR/USD: Bearish continuation
The most popular currency pair in the binary options market continued the downtrend this past week, declining -0.59% (65 pips) to 1.1025. The price action was similar to several previous weeks and it started with the upswing toward the weekly high at 1.1120 on Tuesday afternoon. Since then, EUR/USD was sliding with several bearish cycles followed by short-term retracements. The largest sell-off was noticed on Wednesday when EUR/USD had a failed attempt to climb above 1.11 again but reversed the price action and dropped below 1.1050. After reaching the weekly bottom at 1.1020, the pair entered sideways consolidation.
Two technical indicators were signalling the beginning of trading cycles to start buying put options. Bollinger bands indicator highlighted periods when EUR/USD was reaching extreme overbought levels. Stochastic RSI oscillator was confirming the signal received from the Bollinger bands when its lines were crossing each other in overbought territory and heading south. The end of the training cycle and the short-term rebound was marked by the opposite signal on both indicators. Call-options buyers did not have enough momentum to lift the exchange rate to a significant extent. This is why bullish signals were used to have a break in the trading activity instead of starting to buy call options.
The current technical sentiment is negative and the bearish continuation is expected in the week ahead. However, short-term bullish corrections could offer a more attractive price to start buying put options. Binary options traders have to monitor both technical indicators for intraday signals before entering the market. The resistance range is coming at 1.1060/80 where bearish reversals are likely.
GBP/USD: Bullish recovery
The British pound was one of the strongest currencies among majors versus the US dollar this past week. The GBP/USD currency pair gained +0.5%, coming off the 7-weeks lows at around 1.2960. Despite the general demand for options across the board, the pace of growth was not smooth and stable as the price action was coming together with a lot of rebounds and reversals.
Three active cycles and one consolidation range can be highlighted on the intraday chart. Initially, GBP/USD was recovering from previous losses as call-options buyers were dominant. However, the bullish trade was limited by a strong resistance level at 1.3150. The bulls had 3 attempts to break that resistance through but failed to do so, entering the pair into the sideway strange. After one more failed attempt, the pair charted a long upper shadow on the hourly candlestick on Thursday and dropped back to 1.3050 the bullish momentum was exhausted, while the bears didn't hesitate to use that moment to retaliate.
As a result, there is uncertainty about the direction of the long-term trend, according to the technical analysis. The sentiment is mixed as the average directional index and Parabolic SAR indicator have opposite signals. On the one hand, Parabolic SAR's dots are still above the price since the bearish reversal on Thursday, which points to the selling pressure keep weighing on the demand for the pair. On the other, the average directional index still reflects the bullish momentum noted in the previous week, while the mainline shows quite a strong and growing momentum. Both Bullish and Bearish scenarios are possible for the week ahead, so binary options traders have to wait for a clear signal before entering the market.
USD/CHF: Bullish reversal
The medium-term analysis shows that the Swiss franc reversed the recent trend is USD/CHF recovery most of the losses noted in the previous week. The currency first started the week with a positive bias, edging higher to the local top at 0.9730. However, call-option buyers exhausted the momentum rather quickly and the pair erased all the gains made at the beginning of the week. Wednesday signalled another reversal, lifting the pair back to the resistance range, which attracted binary options traders. Such price action suggests further demand for call options in the week ahead.
As long as several previous weeks were coming together with a sharp decline of the exchange rate, intraday technical indicators did not recover the full extent. What's more, Friday's price action left many questions about the sustainability of the uptrend. Both MACD and RSI have preliminary signs of a bearish divergence is the sequence of higher highs the price chart is followed by the sequence of lower lows on indicators. This is why it is too early to start buying call options for USD/CHF. The best rating approach is to wait for a sharp downswing towards the support level of 0.9670 and start seeking reversal signals there. A possible target to start buying call options placed at 0.9750, which could give a nice profit of 80 pips (four-digit quotes), especially when it comes to expiration times larger than 4 hours.
USD/JPY: Bearish reversal
The Japanese Yen was one of the strongest currencies among majors in the binary options market the back of strong demand for safe-haven assets. The USD/JPY currency pair had suddenly reversed quite a sustainable uptrend after reaching the multi-month high in the previous week. The total loss exceeded 100 pips, while the technical analysis points to even deeper bearish retracement. The Ichimoku cloud trend indicator performed the bearish crossover and deleting span turned negative with a growing surplus in the red. All the indicator's lines were placed in the correct order to reflect the sustainable bearish momentum as put options were in demand for the pair throughout the week.
The daily time frame shows that the nearest support level is placed at around 108.80 yens dollar, and it's already been tested in the early Asian trading session. If put-option buyers were able to overcome the defensive barrier and absorb all of the demand for call options, then the downtrend would accelerate. It is important to follow short-term rebounds to conversion and baseline curves. Both resistance bands can be used to start a new trading cycle of buying put options. The opposite positioning in the market is dangerous because standing against such a strong trend would lead to hard losses of the trading account balance.
AUD/USD: Bearish continuation
The Australian dollar was the weakest currency vs the Greenback as the sealing pressure kept weighing on the currency exchange rate on the back of risk-aversion flows. What's more, the Aussie was weak versus the New Zealand dollar and the Japanese yen. Given the recent momentum, it is hard to expect the currency to recover or reverse the price action in the nearest future. Thus, put options are preferable when it comes to intraday and mid-term trading.
The most effective combination of technical indicators consisted of Williams alligator and Williams %R oscillator. The first one was showing reversal activities when its lines were crossing each other, as well as pointing to resistance and support levels when the price action was getting exhausted. The second one was acting as a secondary tool whether to confirm or deny the pattern on the price chart. Overbought and oversold levels were especially important to monitor for binary options traders who were seeking attractive levels to enter the market, using the sell-highs trading strategy. The medium-term support is coming at around 0.67 and the bears wouldn't calm down before reaching that target, so the bearish scenario should be in place in the week ahead.