Market Reports and Outlook for Week Ending July 14, 2017
The Canadian Dollar is the world’s seventh largest producer of oil. If Crude Oil increases in value then the Canadian Dollar also increases or, if Crude Oil weakens, the Canadian Dollar also weakens. Since the CAD is the second currency in the USDCAD currency pair, the CAD positive correlation with Crude Oil creates a negative correlation in the USDCAD pair. So if Crude is weak, the USDCAD is strong. If Crude is strong, the USDCAD currency will be weak. The chart below shows that as Crude Oil goes down the USDCAD goes up.
This makes the USDCAD a great currency option to trade during the Crude Oil Inventory report exceptwhen the Bank of Canada releases their rate statement. The rate statement will dominant over the Crude Oil Inventory report.
This week, on July 12th, the Bank of Canada releases it’s Monetary Policy Report, Rate Statement, and Overnight Rate at 10:00 am New York time, followed by the Bank of Canada Press Conference at 11:15 am New York time. Since the USDCAD average move immediately after the rate announcement is approximately 80 pips, utilizing an out of the money binary option strategy allows currency traders to limit their risk while potentially capitalizing off a major market report.
Additionally, at 10 am New York time on Wednesday, Federal Chair Yellen will testify before the House Financial Services Committee, followed on Thursday at 10 am New York time, with testimony before the Senate Banking Committee. Initially, the text of her testimony will be released 1 1/2 hours prior to her testimony, which she reads before the committees, followed by a period of questions and answers. During the release of her speech and the question and answer sessions, heavy volatility can be experienced in the indices, gold, and any US Dollar dominated currency pair (AUDUSD, EURUSD, GBPUSD, USDCHF, USDCAD, and USDJPY).
Quite often, during her testimony, markets will quite suddenly spike in one direction only to move in the opposite direction a few moments later. Implementing a strategy to take profits early during her testimony may be a better approach than trying to hold for collecting the maximum profit, if trading binary options.