August 22nd 2014 5:49am GMT, London UK
Today’s Binary Options Trading Strategy:
• Currency Pair: USDCAD
• Timeframe: H4 (Hourly Chart)
• Binary Option Trading Recommendation: Seek binary put options on rallies above 1.0950
• Downside Potential: The downside potential for this binary put option is 150 pips to 1.0800
• Upside Potential: The upside potential for this binary put option is 100 pips to 1.1050
The USDCAD has enjoyed a rally over the past thirty-six trading days which took this currency pair from extremely depressed levels into extremely overextended levels. The rally in this currency pair recorded an intra-day low of 1.0620 reached on July 3rd 2014 and an intra-day high of 1.0986 reached yesterday on August 21st 2014. On the H4 chart we will focus on the intra-day low of 1.0796 reached on July 28th 2014 and yesterday’s intra-day high.
Price action has attempted to correct from extremely overextended levels, but the correction ended on August 15th 2014 with an intra-day low of 1.0860 before the rally continued. This correction and subsequent rally now formed a double top formation which is a bearish chart pattern and the USDCAD is expected to correct once again. Binary options traders can take advantage from the expected correction with binary put options. Today’s binary options trading strategy suggests put options to be placed above 1.0950 for a risk/reward ratio of 1.0/1.50.
The USD/CAD could experience a spike in volatility as well as volume as price action is completing the double top formation, a bearish chart pattern indicative of a potential reversal in price action, and buyers may attempt to force a false breakout before sellers take full control. Today’s economic data out of Canada is expected to provide the catalyst for a rally in the Canadian Dollar which will favor binary put options in the USDCAD currency pair which would correct as the Canadian Dollar rallies.
The expected correction will face its first major support level at 1.0884 which is the opening as well as closing value of the H4 candlestick from August 18th 2014 which marked the end of the previous correction and allowed the rally which formed the current double top formation. A breakdown will take the USDCAD to the 1.0800 level which marks solid support and from where a double bottom formation will emerge.
There is no economic data out of the United States which will impact the base currency, the US Dollar, of the USDCAD currency pair which may leave the US Dollar vulnerable to a correction after a strong rally. This favors binary put options in the USDCAD currency pair.
In addition the following economic reports out of Canada are expected to impact the quote currency, the Canadian Dollar, of the USDCAD currency pair:
Consumer Price Index for the month of July:
• Expectations: Monthly decrease of 0.1%, annualized increase of 2.2%, monthly core increase of 0.1%, annualized core increase of 1.9%
• Previous Month’s Data: Monthly increase of 0.1% in June, annualized increase of 2.4%, monthly core decrease of 0.1%, annualized core increase of 1.8%
• Impact on Canadian Dollar: The expected increase in core consumer inflation may be enough to create a rally in the Canadian Dollar as the Bank of Canada may be pressured to act on interest rates faster than initially anticipated; this favors binary put options in the USDCAD currency pair
Retail Sales for the month of June:
• Expectations: Monthly increase of 0.3%, monthly increase of 0.3% in retail sales less autos
• Previous Month’s Data: Monthly increase of 0.7% in May, monthly increase of 0.1% in retail sales less autos
• Impact on Canadian Dollar: The sharp increase in retail sales less autos is expected to boost the Canadian Dollar which favors binary put options in the USDCAD currency pair