Binary Options Analysis – Trade of the Week: EUR/GBP – June 15, 2015

United Kingdom – Consumer Price Index

eur/gbp binary optionsToday, at GMT 8:30 a.m., the UK’s Office for National Statistics will release the year-over-year consumer price index (CPI), which measures the changes in the price products and services bought by British consumers over the past month. However, this data is presented in an annualized format (y/y).

CPI measures inflation in the economy, and since the Bank of England primarily uses the CPI to measure inflation in the economy, binary options traders pay special attention to this figure. This is because a rising inflation indicates increase in future interest rate, where a decreasing level of inflation in the economy indicates a reduction in the current overnight rate by the BOE.

In May, the UK’s consumer price index suggested that the economy actually had a 0.1% deflation. However, the forecast for June CPI is currently set at 0.1%, indicating at least positive inflation in the economy.

Eurozone – German ZEW Economic Sentiment

Later, at GMT 9:00 a.m., the Zentrum fur Europaische Wirtschaftsforschung (ZEW) will release its Economic Sentiment Index of Germany, which measures the level of a diffusion index by surveying 275 institutional investors and analysts in the country.

Binary options investors consider the German ZEW economic sentiment index to be a leading indicator of the overall German economy because investors and market analysts are considered highly informed regarding the business conditions in the country. Any significant change in their perception would reflect in the ZEW index, which can signal future policy changes by the German Central Bank.

Since Germany makes up a large portion of the overall Eurozone economy, the German ZEW economic sentiment index can also signal valuation of the Euro against other major currencies.

Last month, the German ZEW economic sentiment index reading came out at 41.9 and the forecast for this month is set a very pessimistic reading, at 37.5.

Trade Recommendation for the EUR/GBP

eurgbp-trading

 

Although the EUR/GBP penetrated and closed above the long-term downtrend line in early May, the bullish momentum did not last for long. On  May 7, the pair formed a Bearish Outside Bar (BEOB) and the price fell towards the 0.7050 level by the end of May.

Since reaching near the support around 0.7050, the EUR/GBP price retraced back towards the strong psychological resistance level around 0.7385, Here, it formed a double top pattern on June 9, which pushed the price further down, below the support level around 0.7272.

Currently, the EUR/GBP price is trading near the long-term downtrend line.

As the UK’s inflation situation is expected to improve over the past month and the German ZEW economic sentiment is forecasted to come down to 37.5 from 41.9, this week’s fundamental outlook for the EUR/GBP is highly bearish.

Under the circumstances, it is recommended that traders consider placing a PUT order with their binary options brokers for the EUR/GBP, once the price breaks below last week’s low, at 0.7196.

Recommended Broker: Cherry Trade

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