Yesterday, on October 16th, the President of the Federal Reserve Bank of Saint Louis told Bloomberg TV that the Fed should delay the total tapering of QE3 planned for this month. His concerns are caused by lower inflation expectations coming from investors coupled with much more volatile markets. US stock indices were busy retracing before the statement, thereby reducing to nothing almost the entire gains to all-time highs made this year. After the statement, the VIX went down from the extreme value of 31,06 down to 25,20 while the USA’s major stock indices closed the trading session with a rally.
Once again, the Fed may well taper QE3 to the end during the forthcoming 2-dayFOMC meeting scheduled for October 28th-29th. The current rate of asset purchases is $15billion. The FOMC is planning to reduce it to zero this time if the economic situation in the country favors this crucial move. The argument in favor of continuing QE3 is lower inflation pressure and inflation expectations in the USA.
Previously, the Fed made several statements regarding the fact that the pace of tapering depends on incoming economic figures. Still, the markets and central bankers have been increasingly concerned over the near-term fate of the global economy over the last few weeks. This triggered higher market volatility, thereby making investors fleeing risky assets for safe-have assets.
According to the latest FOMC meeting minutes, the Fed is concerned about a too strong dollar and a global economic slowdown.
According to the Binary Options Department of Masterforex-V Academy, if the QE3 isn’t tapered to zero this time, we may see the dollar bulls taking profit, thereby brining it down against other majors. At the same time, the first interest rate hike in the USA may be delayed until a longer-term future. Alternatively, once the Fed does taper QE3 to the end, the US Dollar may start another wave of strengthening against other currencies.
Technically, while waiting for the final tapering move, selling call options on USDJPY looks like a wise move. Still, id QE3 isn’t tapered to zero, the Japanese Yen may start strengthening as a safe-haven asset. With that said, before the FOMC meeting, they recommend selling options with closer expiry time based on the efficient binary options strategy designed and heavily used at the Binary Options Department of Masterforex-V Academy.
Fundamentally, if the US Dollar goes down, the purchase of the British Pound looks more promising since the UK economy seems to be showing signs of strengths, which is confirmed by positive economic figures. In this case, selling PUT options on GBPUSD is likely to bring you substantial profits.
