In April 2017, the US economy added 211,000 new jobs, bringing the overall unemployment rate down to just 4.4%. Despite a rather lacklustre start to 2017, the US economy has shown its resilience with unemployment reaching a 10-year low. Consumer confidence and business confidence are up, and US bourses are rallying on the back of this good news. Q1 2017 growth was rather anaemic for the country, but negative sentiment appears to have faded as employers boosted April jobs numbers by a long margin. Additionally, the March unemployment rate of 4.5% was bested by an April unemployment rate of just 4.4%. A big part of the reason we are seeing dropping unemployment rates is more full-time employees being hired by companies. This indicates that markets are being cleared with demand/supply and that hiring is taking place in earnest. The average pace of new hires per month in 2017 is up at 185,000, roughly the same as President Obama’s final year in office.
Strong US Economy Bodes Well for Options Traders
The impact of the April jobs figures will likely boost the chances of the Fed raising rates sooner than later. Analysts are now confident that the Fed will implement an additional 25-basis point rate hike in June. According to the CME Group FedWatch tool, there is now a 78.5% likelihood of interest rates rising by 25-basis points on June 14, 2017. If the June rate hike doesn’t come to fruition, it will likely take place in July, with a 74.2% probability of a 25-basis point rate hike in the region of 1.00% – 1.25%. All of this provides binary options currency traders with plenty of cannon fodder. With increasing interest rates around the corner, demand for USD is going to increase. Provided strong economic growth for the April-June quarter continues in 2017, it is all but assured that the Fed will hike interest rates within a month. This gives traders plenty of direction vis-à-vis going long on the greenback, the Dow Jones, the Nasdaq, and the S&P 500 index.
Trading Opportunity #1 – USD/JPY
The USD/JPY currency pair is bullish at 112.7000. The pair has been appreciating since mid-April when it was trading around 108.3230 (April 17, 2017). There are some factors to consider when trading the USD/JPY, notably that the JPY is a safe-haven asset when there is geopolitical uncertainty in Asia. The yen is the go-to currency when the CNY is faltering, or when tensions are boiling over in Asia-Pacific. We have seen some of this taking place with the North Korea debacle, but clearly the strengthening USD has overshadowed tensions in the region. We can attribute the recent strength of the USD/JPY pair to the 4.4% unemployment rate in the US and the strong jobs growth figures we are seeing.
Currency trading experts advise going long on the USD/JPY pair over the short-term. In fact, Deutsche Bank recently revealed that the USD/JPY remains the highest ranked currency pair of the G10. This in itself is a confidence boost to binary options traders looking for direction. Based on the above chart, we can see that the USD/JPY pair is trading above the 200-day moving average (109.20) and above the 50-day moving average (111.69). The bulls are in your court on this one.
Trading Opportunity #2 – CAC and FTSE 100 Index on the Up
The French elections are over. The uncertainty, angst, and political mudslinging are now in our rearview mirror. Of course, the tensions created by the fiercely contested election between centrist Macron and Le Pen are going to plague markets for some time. The rise of populism in the US, and across the world is indeed worrying to financial markets. There were some scares for the centrist Macron after a slew of hacked emails was published. The dramatic differences between the candidates worried the European Union greatly.
Macron envisioned a future where France was part and parcel of an integrated and stronger EU, while Le Pen perceived things differently. On election day, Macron was slated to win 63% of the vote, with Le Pen at 37%. These types of statistics are precisely what European bourses need to rally. The FTSE 100 Index is trading at 7,297.43. However, the FTSE 100 index could rise higher on the back of a weakening GBP. Many currency traders believe that the GBP has been stretched as far as it can go and that weakness is in the wings. The CAC 40 is back in the limelight, up 1.12% at 5,432.40 – attributed to the centrist candidate in the ascendancy.
Trading Opportunity #3 – Gold hits the skids
Gold is a funny old asset to trade. Binary options gold traders know that now is not the time to go long on the precious metal. For starters, the US economy added 211,000 new jobs in April, and unemployment is down to just 4.4%. We also know that fears about a further breakup of the Euro Zone are unlikely. Back in the UK, Brexit concerns have abated to a degree. This means that traders are no longer taking a long-term bearish perspective on gold. That the GBP/USD pair is trading around 1.30 is a bad sign for the precious metal, but the pound will retreat in due course.
For now, the FTSE 100 index, the CAC, the DAX, the Dow Jones, the S&P 500 and the Nasdaq are all in the ascendancy. This is a risk-off period for gold, and a risk-on period for equities. There are other reasons why we should probably adopt a slightly bearish approach to gold: Interest rates are going to rise in the US. Since gold is a dollar-denominated asset, it makes no sense to go long on the precious metal when the Fed is looking to tighten monetary policy by raising rates. Recall that Gold does not earn interest, and the opportunity cost of buying gold when interest rates are rising is a disincentive to investors.
Trading opportunity #4 – Delta Air Lines Inc (DAL) Stock rises
Delta Air Lines Inc. is trading at $48.70 per share, marginally up on the day. On Friday, 5 May, DAL released its quarterly dividend of $0.2025 per share. It will be paid on June 9, 2017. Recall that US airlines have been having a torrid time since video footage emerged of passengers being turfed from their flights after paying for seats, due to over bookings. United Airlines and Delta could be facing additional pressures in the form of International Airlines Group (IAG). This is a low-cost alternative to Delta, American and United. The accessibility of low-cost airline options means that carriers like United, Delta and American are having to cut fares to compete. For now, Delta is on the ascendancy, and traders are giving the stock wings.
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