February 16th, 2015 11:00am GMT, London UK
Today’s Binary Options Trading Strategy:• Currency Pair: USDJPY
• Timeframe: H4 (Hourly Chart)
• Binary Option Trading Recommendation: Seek binary put options on rallies above 119.000
• Downside Potential: The downside potential for this binary put option is 210 pips to 116.900
• Upside Potential: The upside potential for this binary put option is 100 pips to 120.000
The USDJPY is trading inside its horizontal resistance level after this currency pair pulled away from its most recent intra-day high of 120.479 which was reached on February 11th 2015. This marked a false breakout above its horizontal resistance level and this strong move emerged after the USDJPY reached an intra-day low of 116.872 on February 3rd 2015. After a false breakdown below its horizontal resistance level price action drifted to the upside; the USDJPY is now facing an enforced resistance level likely to apply downward pressure on this currency pair.
Price action has formed a head-and-shoulders pattern which is indicative of a potential trend reversal and extended corrective phase. The USDJPY is anticipated to breakdown below its enforced resistance level and correct back down to its horizontal support level. Binary options traders can profit from the expected move to the downside with binary put options. Today’s binary options trading strategy suggests put options to be placed on rallies above 119.000 for a risk/reward ratio of 1.0/2.10.
Volatility has decreased during the advance, but experienced a spike as the false breakout took place. After reaching its most recent intra-day high, and as the USDJPY drifted lower, volatility decreased until the false breakdown occurred. A further increase in volatility is expected as buyers and sellers are set to face off inside an enforced horizontal resistance level. Buyers may attempt a breakout which is unlikely to materialize above this enforced resistance level. Sellers are favored to use this level as a platform to successfully breakdown and challenge its horizontal support level.
The USDJPY will face its first support level, after a successful breakdown below its enforced horizontal resistance level, at its ascending support level around the 118.200 mark. This support level is the only one between its current price and its final support level which is located at its intra-day low of 116.872 recorded on February 3rd 2015. A double bottom formation is expected to form inside its horizontal support level which will make a further move to the downside very unlikely.
The following economic data out of the United States is expected to impact the base currency, the US Dollar, of the USDJPY currency pair:
Building Permits & Housing Starts for the month of January:
• Expectations: An increase of 1.0% is expected in building permits for the month of January, a contraction of 1.7% in housing starts
• Previous Report’s Data: An increase of 0.6% was reported in building permits for the month of December, an increase of 4.4% in housing starts
• Impact on the US Dollar: The expected contraction in housing starts is likely to apply downward pressure on the US Dollar; this favors binary put options in the USDJPY currency pair
In addition the following economic report out of Japan is expected to impact the quote currency, the Japanese Yen, of the USDJPY currency pair:
Annualized Machine Tool Orders for the month of January:
• Expectations: A final reading of 20.9% is expected for the month of January
• Previous Report’s Data: An initial reading of 20.4% was reported for the month of January
• Impact on the Japanese Yen: The expected increase in machine tool orders may suffice to pressure the Japanese Yen to the upside which favors binary put options in the USDJPY currency pair