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By: Adam Stone
July 10th 2014 4:44am GMT, London UK

Binary options traders get ready to start the day with a bit of possible confusion over the issue of the Federal Reserve’s statements and the reactions in the market due to them. The Fed statements were rather definitive, but not all markets reacted to this news as could normally be expected which would be an increase. While Asian stocks rose on the news, the NIKKEI itself dropped 0.3% for the session. In addition, the dollar dipped overall after the Federal Reserve made rather clear that it was in no hurry to end QE3 (quantitative easing). What this means is that the Federal Reserve, headed by Chairwoman Yellen, are not going to be raising interest rates in the foreseeable future making the reaction of the USD rather predictable. But the move lower of the Nikkei, for example, was the outlier here.

It is a striking example of how markets react very differently to news. For binary options traders, the NIKKEI should have been one of the top assets to keep an eye on. Although yesterday our binary options analysis overlooked the possibility of such a drop, it was fairly clear that we expected a push higher by the EUR/USD. The EUR/USD did end up rising as expected.

EURUSD bianry options trading 10-7-2014

In fact, binary options traders should have had a banner day with the EUR/USD which initially pushed past the trend channel resistance at 1.3625 as we expected yesterday. After this move, the market surprised by making a massive push higher past the resistance at 1.3640 which is now the support level for the forex pair. 1.3662 is now the resistance of importance to binary options traders and the trading will be furious as we near this level. The reason for this is that the current formation, obviously trending higher, is also of importance as it clears the way directly to 1.38. With the Fed’s statements yesterday, it is clear that downside pressure on the forex pair is very limited. While it may take some time to develop, binary options trading will no doubt look to the upside for opportunities. Ant opportunism to this end should avoid trying to outsmart the market by going with down options. This would be considered an extremely high risk strategy and we do not recommend it.

Furthermore, we do not recommend using any form of reversal strategy until such time as the support level is stabilized. We don’t expect it to be tested in the coming hours but even if it is tested in the morning session, we recommend moving on for the time being and waiting for a move higher to test resistance.

The BOE interest rate decision today at 11am GMT may add some downside pressure to the USD so long as no surprises are seen. We don’t expect the BOE to make any such sudden policy change and once the announcement reaches the market, we may see some slight moves of the GBP/USD downward, but expect the market to continue to trend upwards immediately thereafter.

BOE Interest rate decision 10-7-2014

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Adam Stone
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Adam Stone

As COO of GOptions, my first and foremost goal is to provide traders with the most up to date info from the markets. I have been trading the markets since 2004 and have been involved with stocks, binary options, and forex trading since then. I have had no formal market education and pride myself on a self taught approach to everything related to trading. I try to focus though on both the technical and fundamental aspects related to each trading day and bring forward the most important aspects of risk/reward in the market.
Adam Stone
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