USD Trading Outlook (30-01-2014)

Currencies

• The euro (EUR) slid to 1.3604 against the dollar as the Federal Open Market Committee (FOMC) announced it will continue as planned to taper 10 billion per month from the 85 billion monthly quantitative easing (QE) programme. This is the second month bringing total monthly QE to 65 billion. The single currency then corrected up to 1.3650.
• The US dollar (USD) broke lower against the Japanese yen (JPY) touching 101.84 before rising to 102.43 as investors pushed for a stronger yen.

Equities

• European equities are lower led by the GER 30 (DAX). The German index touched 9233.5 before correcting this morning above 9333.5 gaining 100 points.

Commodities

• Brent Crude (BRT) remained volatile but keeping in line with economic activity is picking up speed. The global oil benchmark has risen to 107.95 and is looking at testing higher highs after yesterday’s US crude oil inventory release.

Mover & Shaker with forex options

• Gold (XAU) proved to be the most volatile instrument in yesterday’s trading session amid the announcement of the Fed statement. The precious metal rose to 1268.72 before dropping to 1256.90 and rising again above 1270.15. The high volatility was beneficial to options traders who capitalised on their premiums. Looking ahead, the precious metal may look at retesting the support at 1250.00 as markets taste the Fed’s tightening of QE.
• Options traders may consider constructing a Bear Put Spread on Gold if they expect the precious metal to move lower.
• A Bear Put Spread can be constructed by purchasing an at-the-money Put and selling an out-of-the-money Put on gold.