Weekly Binary Options Trading Briefing 2/11-18/2013 – Japanese Yen Rallies on Finance Ministry Comments

Binary Options Trading Recommendations for the upcoming week –  Markets Information and Trading Tips

The S&P 500 closed higher for the 6th consecutive week, as budget agreements in the US and Eurozone were taken alongside another week of better than expected corporate earnings releases.  The combination of these factors helped propel positive sentiment (even with markets at elevated levels) but with limited macro data and a slow earnings calendar next week these markets are now vulnerable for a downside correction as investors start to take profits at these higher levels.

        Apple was one of the bigger stock stories this week, rising nearly 5% after announcements suggested that some of the company’s excessive cash holdings will be returned to shareholders.  Looking broadly, the S&P 500 closed near 1520, which its highest level in 5 years and the benchmark index is now only 3% below its all-time highs of 1565.  Most of the optimism has been generated by the fact that nearly 75% of the 350 companies that have reported profit results have beaten analyst estimates.  The S&P has already rallied 6.5% this year and with price to earnings ratios trading below the 50-year average of 16.6, the long term outlook appears positive. Shorter term, however, we might see a different scenario as there is no immediate catalyst for a major rally in next week’s scheduled. 

Euro Lower, Yen Higher on Central Bank Comments

The Euro saw massive declines after Thursday’s central bank meeting, falling nearly 3% against the British Pound and 2% against the Japanese Yen.  Against the Dollar, the EUR/USD hit lows of 1.3350 and the fundamental driver of these moves was seen after ECB comments suggested that additional interest rate cuts.   With rates already at historic lows, any further declines would make it even less likely the Euro will be used in carry trades, and with the fundamental picture still bleak in the Eurozone, reasons to buy are limited.

A different scenario was seen with the JPY, as the nation’s finance ministry expressed concerns over the drastic volatility that has been seen in recent months.  These comments essentially suggested that 90 is an appropriate value for the USD/JPY.  Since economic data has not shown much change in Japan for more than 2 decades, price values in the Yen tend to be dictated more by central bank comments than they do with economic releases.  Next week will be mostly quiet in terms of event risks but we will have a Bank of Japan interest rate decision and GDP figures.  The policy comments after the policy meeting are likely to be more market moving and we will be looking for a short term day trade after those comments are released.

My Trading Recommendations

 1.  The EUR/GBP saw a massive drop last week and longer term this is expected to continue as the fundamental picture has not matched with the technical picture in recent months.  At this stage, its just a matter of deciding on price levels and with last week’s top at 0.87, we can look for weekly PUT options in the EUR/GBP at 0.8520.

2. With little in the way of fundamental drivers for stocks next week, I expect some profit taking in the S&P 500 and the current elevated levels look good for weekly PUT options at 1520.  Earnings reports are mostly second-tier so we would need to see significant surprises to run higher here near term.

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