Although the past trading week started with a retest of the multi-year low at 1.0636, the most popular currency pair in the binary options market had an impressive rebound up to 1.1141, soaring more than +4% this past week. All of the five daily candlesticks were in the green, and even the 4-hours expiration period had more than 75% of profitable deals to buy call options for EUR/USD. However, things are not so direct in terms of the technical analysis perspective and here is why.
The daily chart below shows nothing but uncertainty in terms of the technical analysis as many major technical indicators conflict with each other. On the one hand, the Chaikin Oscillator crossed the zero level and entered into the accumulation zone, which is supposed to confirm the recent bullish momentum. On top of that, the Average Directional Index performed a bullish crossover of -DI and +DI lines, changing the local technical sentiment to bullish. On the other side of the equation, the ADX mainline dropped significantly, signalling that the bullish momentum is getting exhausted. Meantime, the Average True Range indicator kept rising, suggesting that the volatility is the only thing to guarantee in the week ahead.
Given all that, we suggest that the demand for put options for EUR/USD should have a huge spike in the week ahead and the recent jump of the exchange rate was nothing but a fake breakout. The call-option buyers might have an attempt to test the crucial psychological round-figure resistance of 1.1200 dollars per Euro, but our scenarios point to fail. Thus, it would be reasonable to wait for EUR/USD to test the resistance and start buying put options from there.
The price of gold jumped almost 9% this past week. Most commercial and investment banks reported a shortage in the physical supply of gold bars and coins. The problem has got worse because of the civil aviation flights ban as many banks used to take advantage of sending gold via passenger flights. On top of that, the technical analysis used to point out the fake nature of the recent bearish rebound towards $1450 per ounce in the previous week, and the analysis was right.
The previous trading week brought several technical achievements in terms of the bullish reversal. First of all, the price of gold broke through the triple resistance curves of the Williams Alligator, appearing above all of the three lines. The price action led to the bullish crossover of the indicator as all of the lines placed into the bullish eating mode. The MACD trend indicator switched the technical sentiment to bullish as the histogram turned bullish, while both lines crossed each other to underline the bullish momentum. The 13-days Relative Strength Index bounced off the oversold zone and edged north, leaving more potential before the overbought threshold.
Although the price of gold had a short-lived rebound last Friday, we suggest that the weekly target would not be limited to the recent peak of $1703. The recent bearish retracement showed the depth of the long-term uptrend, and it came to the end, so the bulls would not hesitate to take advantage of the recent change in the technical sentiment. If the price of gold breached $1703 from below, the medium-term target would be shifted to $1800 per ounce. Therefore, buying call options for gold with an expiration time of 24-, 4- and 1-hour isn’t a bad idea for the upcoming week.
Despite the fact that the British pound was the strongest major currency versus the greenback across the board last week, we suggest that it is getting extremely overbought and a bearish rebound (if not reversal) for GBP/USD is likely. The daily chart below shows that the recent bullish recovery of the GBP/USD currency pair is getting to the middle range of the recent plunge and that resistance curve might be crucial for the bearish reversal.
After the bullish crossover in Stochastic RSI and repeatedly bearish breakout in the Bollinger Bands indicator, GBP/USD shows a bullish retracement that breaks the threshold of the downtrend at the bottom line of the BB indicator with deviation 1 and the same period of 34 days. Unfortunately for the bears, the middle line of both Bollinger Bands indicators comes at 1.2600 and it is descending. So even if the weekly Ichimoku resistance of 1.2314 did not limit the bullish rebound, the GBP/USD currency pair is still vulnerable to another leg of hard selling pressure. The only question for the technical analysis is where is it going to start. In our opinion, the range of 1.27/28 is extremely attractive for long-term binary options traders to start buying put options for GBP/USD. On top of that, aggressive traders might consider buying out options for the pair right at the market open on Monday.
Although the Loonie was one of the strongest commodity currencies across the board during the panic buying of call options for the greenback, USD/CAD retraced with a 600 pips range this past week. The main concern for the technical analysis was that call-option buyers were unable to breach the threshold of 1.4500 last week, and the exchange rate bounced below 1.4000 as the result. In other words, USD/CAD was vulnerable to the bearish reversal to much more extent than AUD/USD or NZD/USD, which experienced a tough sell-off. That means that USD/CAD might drop to 1.3750 and 1.3600 in extension if the demand for the greenback eased across the board.
The most interesting part of the story was that Crude Oil price kept sliding, while the Loonie strengthened. So the fundamental part of the analysis shows a certain divergence of the recent trend. If things continued influencing the USD/CAD currency pair in the same way in the week ahead, then we’d see the exchange rate trading at the six-weeks bottom of 1.3628, which is the upper range of the Ichimoku leading span for 6 weeks ahead. In simple words, the fundamental analysis might not work properly for the Canadian dollar as the local economy is much less vulnerable to the global processes that are happening nowadays than most of the analysts thought. Therefore, buying call options for CAD 9or put options for USD/CAD (and GBP/CAD and EUR/CAD) is not a bad idea.
GBP/JPY: Extremely Bearish
The daily chart below represents the market’s sentiment about the GBP/JPY cross-rate. It is really hard to believe that a bullish rebound of more than 1200 pips might be false. Or temporary at least. The technical analysis shows that the bullish correction might come to an end as the bulls failed to breach the Ichimoku Baseline resistance curve from below. On top of that, the leading span remained bearish despite the recent bullish recovery of more than 1000 pips in eight days. The chart setups offer an extremely attractive opportunity to start buying put options for GBP/JPY with intraday expiry, as well as medium-term perspective. The initial target and support are currently placed at 129.40 yens per pound (500+ pips to go!), while the mid-term target might be at the recent bottom of 125.58 and 124.06 in extension.