Binary Option Setups: Week of July 18th – 22nd

BinaryOptionsNow | Published on July 17, 2011 at 9:28 am

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The ongoing debt crises both in the EU and the US made for tumultuous times for the financial markets last week with the euro dropping to a new 4-month low against the US dollar.

Amid concerns Italy would join the ranks of Portugal and Greece in failing to meets its debt obligations, the euro dipped to a low of 1.3844 vis-a-vis its US counterpart on July 12th.

Moody’s took the decision to drop Portugal and Ireland’s ratings last week and warned that US government bonds would be placed on review for a possible downgrade in wake of the deadlock in the US Congress over finding a solution to avoid defaulting on US debt obligations.

On Wednesday and Thursday of last week, traders watched closely as US Federal Reserve Chairman Ben Bernanke spoke to the US Congress about the national economy. Bernanke declared that the central bank was ready to ease monetary policy further if the economy weakens and inflation moves lower which many interpreted as a sign that the Fed may soon launch a “Quantitative Easing 3″ program to help move the US economy move forward.

Potential Binary Option Setups

Following on the heels of these turbulent economic times, there may exist lucrative opportunities to profit from binary options investments that take advantage of the short-term volatility in the major forex pairs. 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. German ZEW Economic Sentiment (Monthly) – Tuesday, July 19th 10:00 A.M. GMT – The German Zentrum für Europäische Wirtschaftsforschung (ZEW) Economic Sentiment survey determines the sentiment of German institutional investors based on the opinions of 350 German institutional investors and analysts.

A number above 0 indicates an overall optimistic outlook for the economy while a number below 0 indicates a more pessimistic outlook. The previous ZEW reading was released on June 21st and came out much lower than the predicted number of -3.0 measuring in at -9.0. This week, the forecast is for -12.3, indicating a worsening economic sentiment outlook.

If a trader believes that the ZEW Economic Sentiment report’s outcome is likely to affect the trading of the euro, one way to profit would be to invest in a EUR/USD binary option that expires 30 minutes to one hour after the report is released.

If the general sentiment is that the ZEW will come out far below the prediction of -12.3, it may be prudent to invest in a call EUR/USD binary option with the idea that the euro will decrease in value vis-a-vis the US dollar.

If, on the other hand, there is grounds for optimism and the feeling is that the ZEW reading will be much higher than -12.3, indicating a positive outlook for the EU economy, it may be prudent to invest in a put EUR/USD binary option with the expectation that the euro will increase in value against the greenback.

2. UK Retail Sales (Monthly) – Thursday, July 21st 9:30 A.M. GMT – The retail sales is a monthly measurement of all goods sold by retailers based on a sampling of retail stores of different types and sizes in the UK compiled by the Office for National Statistics.

The previous figure released on June 16th was -1.4% which was quite negative since the previous forecast was for -0.5%. The forecast this month is for an increase of 0.6%.

An opportunity to profit from a GBP/USD forex binary option may present itself if the UK retails sales reading is much higher or lower than the predicted outcome. Should the reading be higher than expected this could indicate that expectations for the UK economy are positive and the pound may in turn be buoyed by these expectations and increase in value against the US dollar. In this case, an investment in a put GBP/USD binary option at or around the release of the retails sales data may finish in-the-money.

If, on the other hand, the retail sales reading comes out way below expectation, the pound may be negatively impacted by this data and sink in value against its US counterpart. In that case, a call GBP/USD binary option investment made at or around the the release of the data may finish in-the-money.

3. German Ifo Business Climate Index (Monthly) – Friday, July 22nd 9:00 A.M GMT – The Ifo Business Climate Index is a report published by the Ifo Institute for Economic Research that determines the business sentiment and conditions in the euro zone.

The reading is concluded from a survey of about 7,000 businesses. The previous Ifo index reading came out at 114.5 which was above the forecast of 113.4. The current forecast for this reading is 113.6.

A higher than expected number could indicate a strengthening of the EU economy and a put on an EUR/USD binary option executed at or around the release of this data could take advantage of this positive euro 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 EUR/USD binary option.

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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