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By: Adam Stone
July 23rd 2014 6:20am GMT, London UK

After explaining yesterday that the channel of trading for the EUR/USD would likely hold up and allow binary options trading strategies based on reversals to flourish, it was all for nought. The market had the bottom drop out on it as the USD climbed up strongly as the S&P and later the Asian indices shot up higher. We did provide an inkling of hope for such a break but admittedly, we could not have anticipated such a massive move by the USD. Binary options traders watched as the forex pair broke below the support 1.3515 and fell all the way to 1.3457. While not necessarily a true support level, for day traders, this level will act at least as a pivot point for all types of strategies.

Binary options trading strategies need to take into consideration the fact that the forex pair is now at its lowest level since mid-December and this has some serious implications for traders. For starters, such a large move and into year long lows might create a few jitters in the market as the EU session gets going today. The issue is that the news from yesterday is what pushed the USD higher and it was economic news that did the majority of the job.

Inflation reports were the focus of yesterday’s trading day. The U.S. CPI (consumer price index) headed higher by 2.1% in June but was actually unchanged from the previous month. What’s interesting here is that this figure is completely in line with expectations which is why many traders had no expectation for such a move. In addition, the other inflation figure which was the month on month CPI, headed higher as well by 0.3% after a 0.4% increase in May. But this too was completely in line with expectations.

So what can cause such a massive move without any real change of direction in financial terms ? Pure speculation is the correct answer. Yes, sometimes the market is being dictated by everything other than economic terms and the forces at play are basically betting on one of two possibilities:
1. The push is going to be an instigator for further moves lower by the EUR/USD and the major banks bet at what can be deemed a “high” price in order to take advantage
2. The push was meant to simply get prices lower so that the major banks could scoop up cheaper prices of the forex pair for longer term holdings. Such holdings aren’t long term by normal standards but rather measured in hours, not even days.

For the trading day ahead, some early trading events like the Bank of England’s policy decision as well as New Zealand’s interest rate decisions are all slated for the day. Don’t expect much in this case as the market is not looking for a change in either country’s bank policy. Interest rates are expected to remain on the same track so only Carney’s speech at 11:45 GMT may shed some light on future moves for at least the GBP. Binary options traders should certainly stay tuned.

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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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