This week I would like to raise a question I recently received from several traders and to have a few words about the relationship between the stock market and the currency market, is there supposed to be a correlation between the two markets?
The question was raised because in the last few weeks we experience a decline in the currency market while in the stock market we experience new records almost every day,
Basically, the market should be aligned and to react the events in a rational behavior, meaning when there is a negative atmosphere both the currency market and the stock market should react to this negative mood by showing a decline trend.
If we look at the past where the market experienced the great declines such as 2008, you’ll notice that just before the sharp decline in the stock market the currency market already start to show a weakness, in-fact the currency market was signaling what is ahead of us, it was acting like a warning sign.
For now the currency market is actually warning us from a bear market that is going to happen, it’s just a matter of time.
As usual here is the analysis for the upcoming week
We received from you lots of nice feedbacks, showing us the great trading you made follow our last analysis, as I mentioned in the last weekly analysis, the EURUSD is moving between two boundaries,
For us, the binary option traders it was a huge opportunity to make some money from a decline market where the boundaries are clear.
After the completion of the move EURUSD touches the support line, now it’s time to go neutral and see what’s happen, if the EURUSD breaks the support line w should seek the right setup to trade some put options, at any case, after great period of gaining put options it’s time to sit back and watch, if you still want to trade the currency, seek for short term trades, here is a link for a great strategy for short term options.
It’s the Brexit aftershock effect, the currency has switched from a super volatile to very steady, the best way to see it is in the daily chart:
The trading boundaries are narrowing down, also in the 4 hour chart:
Personally I like these kind of setups, what I usually do is placing orders for boundary options, where the limits are Bollinger bands 3.0 in both sides, here is a reminder how to trade the Bollinger bands
The gold shows us one of the great opportunities to try and join a long terms trend, as expected it touches the support line and stops there in case it will not break down the support line it’s one of the rare opportunities to get some call options with a right timing on the Gold.
As a reminder here is the chart from last week and the current to show you the overall trading plan
Gold 17.07 – Daily
Gold 24.07 – Daily
Another great opportunity which is very much similar to the gold is the USDJPY, the currency is trend by its resistance line in a decline trend and now it touches the resistance line again, at this point there is a good chance of breaking out the resistance line and to switch the trend to a neutral, until it do that, the decline trend continues, a binary option trader is like a hunter, I’ll wait for the right setup to attack some put options.
Here is a daily chart for USDJPY:
For now, in uncertain times like this, I rather to stay away from the stock and indexes market, there are lots of opportunities out there in the currency market.
For all of you the binary option traders, have a great week and lots of success