Trading Federal Reserve Meetings with Binary Options

BinaryOptionsNow | Published on September 19, 2011 at 3:11 pm

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The Federal Reserve’s Federal Open Market Committee is slated to meet on Tuesday and Wednesday of this week and the financial markets are expecting serious steps to be taken in order to exert downward pressure on long-term interest rates and give a boost to the flailing American economy.

The meeting will last two days, even though it was originally intended to be a one-day affair. Fed Chairman Ben Bernanke announced in Jackson Hole on August 26th that the meeting would last two days in order to give extra time to discussing ways to aid economic recovery.

Investors and traders are likely to keep a close watch over the meeting’s outcome as the worrying situation in Europe gives no sign of abating in the absence of any new loan to Greece while the country is dangerously close to the default.

If a trader believes that the FOMC meeting is likely to affect the trading of the greenback, one way to profit would be to invest in a EUR/USD binary option around the time the decision is released at 18:15 GMT on Wednesday.

If the general sentiment is that Fed’s decision will not help boost investor confidence in the markets, it may be prudent to invest in a Call EUR/USD binary option at or around the time the FOMC decision is released with the idea that the euro will increase in value vis-a-vis the US dollar.

If the Fed’s decisions contribute to a positive outlook for the US economy, it may be profitable to invest in a Put EUR/USD binary option with the expectation that the USD will increase in value against the EU single currency.

Wednesday will also mark the release of the US Existing Home Sales report at 14:00 GMT. This data is a monthly measurement of the change in the annualized number of existing residential buildings that were sold during the previous month. It is a major indicator of the US Housing market health.

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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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