Several factors this week led to a strengthened U.S. dollar and the tumbling of the Australian dollar. The most important being Janet Yellen’s speech confirming interest rates would be raised if the U.S. economic recovery continued. After so much speculation about whether or not the Fed was committed towards raising interest rates this year, a confirmation from the US Federal Reserve chair rallied the greenback. This speech in combination with the release of stronger-than-expected economic news led to a surge in the U.S. dollar.
Stronger than expected economic releases for the U.S. dollar this week:
In Australia, the markets closed lower Thursday due to lower than expected capital expenditure (Capex data). Business investment fell 4.4% in the March quarter, which is a much larger fall than the median market forecast of 2.4%.
This week still has significant economic news releases, both for the U.S. dollar and for the Australian dollar. The biggest news release will be the USD Gross Domestic Product (GDP) on Friday the 29th, which will have the highest impact on the dollar. For Australia, at 01:00 GMT on Friday the 29th, it has a Housing Industry Association (HIA) New Home Sales for MoM data.
As the AUD/USD is now at its 1-month low-point, what are some simple FX option trades that could be opened before these economic events?
Long (buy) Call
If you expect as an option trader the AUD/USD to reverse its course and take an upward trend, you can open an AUD/USD Call option position with an expiry after this week’s GDP event. You could also adjust the strike and buy an ITM or OTM call. See lesson on Determining a Buy Call Option’s Moneyness if you would like to understand strikes and moneyness.
In the optionsReasy web-platform:
Long (buy) Put
If you expect as an option trader the AUD/USD to continue on a downward trend, you can open an AUD/USD Put option position with an expiry after this week’s GBP event. You could also adjust the strike and buy an ITM or OTM call. See lesson on Determining a Buy Put Option’s Moneyness if you would like to understand strikes and moneyness.
Example in the optionsReasy web-platform:
Stronger than expected economic releases for the U.S. dollar this week:
- New Home Sales (MoM) (Apr) was expected to 0.510M and the actual result was 0.517M
- Durable Goods Orders ex Transportation (Apr) was expected at 0.3% and the actual result was 0.5%
- Consumer Confidence also increased from April – from 94.3 to 95.4
In Australia, the markets closed lower Thursday due to lower than expected capital expenditure (Capex data). Business investment fell 4.4% in the March quarter, which is a much larger fall than the median market forecast of 2.4%.
This week still has significant economic news releases, both for the U.S. dollar and for the Australian dollar. The biggest news release will be the USD Gross Domestic Product (GDP) on Friday the 29th, which will have the highest impact on the dollar. For Australia, at 01:00 GMT on Friday the 29th, it has a Housing Industry Association (HIA) New Home Sales for MoM data.
As the AUD/USD is now at its 1-month low-point, what are some simple FX option trades that could be opened before these economic events?
Long (buy) Call
If you expect as an option trader the AUD/USD to reverse its course and take an upward trend, you can open an AUD/USD Call option position with an expiry after this week’s GDP event. You could also adjust the strike and buy an ITM or OTM call. See lesson on Determining a Buy Call Option’s Moneyness if you would like to understand strikes and moneyness.
In the optionsReasy web-platform:
Long (buy) Put
If you expect as an option trader the AUD/USD to continue on a downward trend, you can open an AUD/USD Put option position with an expiry after this week’s GBP event. You could also adjust the strike and buy an ITM or OTM call. See lesson on Determining a Buy Put Option’s Moneyness if you would like to understand strikes and moneyness.
Example in the optionsReasy web-platform:
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