Binary Option Setup of the Day: August 1st

BinaryOptionsNow | Published on August 1, 2011 at 9:40 am

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In the wake of the historic agreement to raise the US debt ceiling in order to avoid a default, optimism for the dollar is back and, as such, today’s binary option setup is directly linked to the US currency.

ISM Index for July

Today at 2:00 P.M. GMT, the Institute for Supply Management is set to release its monthly index which tracks the amount of manufacturing activity in the US in July. The ISM index is the result of a survey of over 400 companies in 20 industries throughout the 50 states. The index is considered a very important and trusted measure of US industrial production.

A higher than expected reading should be taken as a positive sign for the USD since it indicates that US manufacturing is increasing at a faster pace than predicted, while a lower than expected reading should be taken as negative for the greenback.

The previous ISM Manufacturing Index was 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. A value substantially above 50 likely indicates a period of robust economic growth.

According to Natixis, we can expect a further increase in the ISM manufacturing index for July. After a positive month in June, the recent publication of regional surveys available at this time suggests a further improvement in manufacturing activity.

Despite the fact that the Richmond manufacturing index has deteriorated (from 3 to -1), the regional manufacturing indices for New York (-7.2 to -3.8), Philadelphia (-7.2 to 3.2) and Dallas (5.6 to 10.8) have improved in July which supports the increased forecast of the aggregate ISM manufacturing index from 55.3 to 56 set to be released later today.

Binary Option Strategy

If you believe that there is grounds for optimism and feel that the ISM Manufacturing Index reading will be higher than predicted for July, indicating a positive outlook for the US economy, you may be able to profit by investing in a forex binary option on EUR/USD.

One way to invest would be to invest in a PUT on an EUR/USD binary option with a 30-minute to one-hour expiry at or around the time of the release of the ISM report with the expectation that the dollar will increase in value against the EU’s single currency.

Another way to use a binary option investment during the release of this index would be to hedge a forex position with a forex binary option: If you decide go short on EUR/USD at or around the release of the index, you could also invest in a CALL on an EUR/USD binary option that expires 30 minutes to an hour after the index is released so that your risk exposure is limited if the EUR/USD increases in value contrary to your predictions. (For more on this binary option strategy, click here).

Remember, the financial markets are constantly being influenced by myriad factors so there is no guarantee that this strategy will always work in your favor. However, when used appropriately, binary options may limit a trader’s exposure to risk in the financial markets and may enable one to profit from the release of information such as the ISM index.

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