As the world waits to see what the U.S. Federal Reserve is going to do about interest rates, action with the EUR/USD Forex pair has become a bit more unpredictable than normal. b general direction of the asset is now downward, but there have been severe upswings in the price as the euro fights back. The main problem is that the world is confident that the Fed will not be raising interest rates anytime soon. The general consensus seems to be that this won’t happen for several more months.
In fact, almost nobody expects the Fed to be raising rates in June, and the EUR/USD is strongly reflecting this. After several different items have indicated that the U.S. economy is not nearly as strong as it was believed to be a few weeks ago, such as the employment report from May that was released at the beginning of the month, action on the world’s most widely traded currency pair has reflected this as the dollar has significantly gained against the euro. Over the last week, it has gone from a high of about 1.14 down to below 1.12 at times. Even though it appears that a relative bottom is approaching, this isn’t 100 percent clear yet. For this reason, right now is a tough time to take out ultra short term trades on the euro/U.S. dollar pair, but it’s also the same reason why watching the market and getting ready for your next few trades on this particular asset is such a smart idea. Although there’s a bit of uncertainty right now, there’s also a ton of potential in the works.
What this means for traders, both Forex and binary options, is that much of the price movement that a Fed announcement would generate has already occurred. If you are a news trader (and you should be, if you aren’t), then the bulk of the movement that this news would generate has already happened, even though no official announcement has yet been made. Anticipation of something like this has benefits, but also dangers.
The big news event would be if the Fed did raise rates. If this were to happen, the USD would plummet against virtually all currencies. In a situation like this, taking out as many different trades as you could in favor of the euro over the dollar would be your best bet. Be sure to vary the expiries that you are working with in order to give yourself an extra element of safety. Also, be sure to act as quickly as possible. The Fed is expected to make their announcement at about 2:30 PM EST at the conclusion of their meeting, and getting in your positions as soon as possible after this, staggering them, of course, is going to get you into a good spot when it comes to increasing your profitability as a trader.
Trading the news is an extremely powerful method to improve your success as a binary options trader, largely because so much of short term trading is based upon psychological motives. Being able to separate yourself from that, and then take a step back and look at it analytically, will do wonders for increasing your correct trade rate, and thus your bottom line. The most simplistic way to approach this is with binary options, but you can also apply the same principles to the Forex market, if you don’t mind the extra complexities that come along with timing exits and using leverage. Both can be equally beneficial to you, as long as you understand the risks associated with each, and are able to employ safeguards to protect yourself.