Binary Option Setups: Week of August 1st – 5th

BinaryOptionsNow | Published on July 31, 2011 at 6:33 am

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As the US appears to inch closer to the prospect of defaulting on its loan obligations, the financial markets anxiously await the outcome of ongoing negotiations between Republicans and Democrats to reach an agreement on raising the legal US debt limit before the Treasury’s deadline of August 2nd.

The current turbulent economic times may provide lucrative opportunities to profit from binary options investments that take advantage of the short-term volatility in the major forex pairs including, specifically, the US dollar.

Potential Binary Option Setups

Here is a list of economic events that may provide the right conditions for a forex binary option investment to finish in-the-money:

 

1. US ISM Manufacturing Index (Monthly) – Monday, August 1st 2:00 P.M. GMT – The Institute of Supply Management (ISM) Manufacturing Index tracks the amount of manufacturing activity that occurred in the previous month. It is provided by the Institute for Supply Management. A higher than expected reading should be taken as positive for the USD, while a lower than expected reading should be taken as negative for the USD.

The previous ISM Manufacturing Index released on July 1st and came out at 55.3, which was positive since the previous forecast was for 51.5. The forecast this month is 56.

If the general sentiment is that the ISM Manufacturing Index will come out far below the prediction of 56, it may be prudent to invest in a CALL on an EUR/USD binary option with the idea that US dollar will decline in value vis-a-vis the euro.

If, on the other hand, there is grounds for optimism and the feeling is that the ISM Manufacturing Index reading will be much higher than 56, indicating a positive outlook for the US economy, it may be prudent to invest in a PUT on an EUR/USD binary option with the expectation that the dollar will increase in value against the EU’s single currency.

 

2. AUD Interest Rate Decision (Monthly) – Tuesday, August 2nd, 4:30 A.M. GMT – The Reserve Bank of Australia (RBA) decision on where to set interest rates will depend mostly on the growth outlook and inflation of the country.

A higher than expected rate is positive for the AUD, while a lower than expected rate is negative for the AUD.

According to analysts, the Reserve Bank of Australia will not modify its current interest rate of 4.75%. Moreover, this rate has not been changed since October 2010 (4.50%).

 

3. US ADP National Employment Report (Monthly) – Wednesday, August 3rd 12:15 GMT –  The ADP National Employment Report measures the monthly change of nonfarm private employment, based on a subset of aggregated and anonymous payroll data that represents approximately 400,000 U.S. business clients. It is released by the Bureau of Labor Statistics.

A higher than expected reading should be taken as bullish for the USD, while a lower than expected reading should be taken as bearish for the USD.

The previous figure released on July 7th was 157K which was quite positive since the previous forecast was for 60K. The forecast this month is 95K.

An opportunity to profit from an EUR/USD forex binary option may present itself if the ADP National Employment Report is much higher or lower than the predicted outcome.

Should the reading be higher than expected, this could indicate that expectations for the USD are positive and the dollar may in turn be buoyed by these expectations and increase in value against the EU’s single currency. In this case, an investment in a put EUR/USD binary option at or around the release of the employment figures may finish in-the-money.

If, on the other hand, the ADP National Employment figures come out way below expectation, the USD may be negatively impacted by this data and lose ground against its EU counterpart. In that case, a CALL on an EUR/USD binary option investment made at or around the release of the data may finish in-the-money.

 

4. Swiss Consumer Price Index (Monthly) – Friday, August 5th 7:15 A.M GMT – The Consumer Price Index (CPI) measures the changes in the price of goods and services and is a key way to measure changes in purchasing trends and inflation in Switzerland. A higher than expected reading should be taken as bullish for the CHF, while a lower than expected reading should be taken as bearish for the Swissy.

The previous Swiss CPI figure released on July 7th was -0.2% which was exactly what analysts had forecasted. The forecast this month is for a figure of -0.5%.

 

5. US Nonfarm Payrolls (Monthly) – Friday, August 5th 12:30 GMT – The Nonfarm Payrolls measures the change in the number of employed people during the last month of all non-farming businesses. Its total accounts for approximately 80% of the workers who produce the entire gross domestic product of the United States and as such it is perhaps the most influential statistic on the US labor market.

A higher than expected reading should be taken as positive for the USD, while a lower than expected reading should be taken as negative for the USD.

The previous Nonfarm Payrolls figure released on July 8th was 18K – which was very negative since analysts had forecasted 89K – had a very strong impact on the EUR/USD and GBP/USD (click here to see forex charts following previous nonfarm payrolls release).

The forecast this month is for a figure of 70K.

If a trader anticipates that US Nonfarm Payrolls is likely to affect the exchange rate of the pound, one way to profit would be to invest in a GBP/USD binary option that expires 30 minutes to one hour after the reading is released.

A higher than expected Nonfarm Payrolls number could indicate that the US economy is strengthening and, in that case, a PUT on an GBP/USD binary option, for example, executed at or around the release of this data could take advantage of this positive US dollar indicator and finish in-the-money. A lower than expected result, on the other hand, could allow for prime conditions to invest in a CALL on a GBP/USD binary option.

 

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*As always, keep in mind that the major forex pairs are constantly being influenced by many other factors beyond the release of economic data and that previous results do not guarantee future outcomes.

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