Binary Options Weekly Briefing 10-15.9 – Disappointing Non-Farm Payrolls Leads to Stimulus Expectations

Binary Options Trading Recommendation for this week –  Market Information and Trading Tips

Equity markets had an interesting close to the week, as  the large marjority of the market held off on establishing positions prior to the monthly Non Farm Payrolls figures out of the US.  Typically, a weak jobs figure in the world’s largest economy will have a weighing effect on stock prices and high yielding currencies but given the current market environment (and the recent pro-stimulus rhetoric from several major central banks), this was not the case.

       Prolonged weakness in the global economic recovery has been apparent when looking at the weakness in manufacturing productivity (on China, the Eurozone and the US) and this has led to increasing speculation suggesting each of these regions will need to add stimulus measures in order to support prospects in the labor market into the end of this year.  As a result, the weak Non Farm Payrolls figures seen on Friday (96,000 jobs created versus the expected 130,000) actually led to small rallies in stock markets and non-safe haven currencies. 

Changing Market Environment

       Into the close on Friday, treasuries and Gold prices rose  along with the S&P 500 (which hit a new yearly high just below 1440) and the Euro (which managed to push back above 1.28).  While this reaction might seem counter-intuitive to some traders, those with a firm understanding of the central bank outlook were less surprised as it has become clear in recent weeks that the market environment is changing and traders should be looking to prepare for what is likely to come next.

       Looking ahead, traders should expect the positive momentum to continue into Moday as the Asian markets have a chance to respond to the latest developments.   With the major event risks now in the rear view mirror (Jackson Hole symposium, ECB rate decision, and US Non Farm Payrolls), most of the attention will gravitate toward central bank commentary, as this is the “make or break” for equity markets into the end of the year. 

       Any indication that central bankers are concerned with the level of progress that is being made (or not being made) will keep stock prices supported in the near term.  But without this, there is very little to fuel investor optimism and with the elevated levels we are currently seeing, risk to reward ratios clearly favor the downside.   Stock markets hitting yearly highs when economic data is suggesting continued weakness is something that should be raising red flags to those holding long term buy positions in equities, so pay special attention to central bank commentaries in the coming weeks.

My Trading Recommendation in 50 Words

   Substantial declines in the USD/JPY are presenting some interesting contrarian opportunities, with very little to argue against carry trade strategies.  I will enter into 1 month CALL options at current levels, targeting 79.20.