The long awaited fed FOMC meeting took place yesterday in New York and triggered a lot of opportunities for binary option traders. So what exactly happened and how could you have benefited from it with binary option trades?
Even as the FOMC comments could have appeared hawkish (oriented toward less monetary easing and the eventuality of an imminent rate hike), there might have been one sentence in the Fed FOMC Statement that caused the market to surge against all odds. The US equity market indeed jumped on the FOMC comments release with the SP500 Index closing up +1.22% and the Nasdaq (the benchmark index for technology equity stocks) closing up +0.92%. Meanwhile, the EURSUSD exchange rate soared as much as 3.98% on the announcement from 1.0620 to 1.1043.
What was the most important sentence of the FOMC comments?
As explain, the surge on US equity indices was surprising considering the FOMC dropped the word “patient,” from its comments theoretically opening the door to a June rate hike that would have a negative impact on US equities and that should further strengthen the dollar against other major currencies. Nevertheless, the important sentence of the FOMC statement is the below: “The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term”.
Even if the “patient” word was dropped from the FOMC statement, the above sentence seems to add further conditionality to the expected rate hike. Should the labor market deteriorate in the next months, the Fed could unilaterally decide to delay its tightening policies. Such delay could further weaken the US dollar and push the US equity market higher.
The perfect conditions for binary option trades
As you can see, these were the perfect conditions to initiate trades on binary options. You could have buy a high binary option on the S&P500 or on the EURUSD to benefit from the quick jump in price on both assets just after the FOMC announcement. You definitely need to learn how to interpret such statement to be able to build successful binary option trading strategies. Such strategy linked to an institution announcement is called an event-driven strategy. You can find further information on this type of transactions on the “Strategy” section of the website.
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