The Aussie is set to rise despite the FED continuing its tapering
The Australian currency has dropped from above 0.8820 providing us with a golden opportunity to buy daily call options. Our view is that current levels as of writing about 0.8770 are perfect for aggressive purchases of daily and weekly call options.
There is no doubt that there will be volatility tonight as the Federal Reserve announces the result from its two day policy meeting, however if it maintains its tapering effort reducing further support for the bond markets we think this is already pretty much priced into the market.
This is why the US dollar is unlikely to rally much further from here. The Chinese have bailed out a troubled investment arm of the Agricultural Bank of China already. While official statements do not reveal where did the money come from, investors will be able to withdraw their funds.
This is a dangerous precedent that can encourage Chinese banks to involve themselves further in questionable dealings with property funds and local governments, however it has reduced the immediate risks facing the Chinese economy.
That should have a positive impact on the economy of Australia as China is its major trading partner. However for now the Aussie has remained rather dormant for the most part of this week even as risk assets like stocks have pulled gains.
Looking at the chart we see that major support has held this hour around 0.8760-63 and the pair bounced from 0.8650 rather briskly. The next downside level is about 0.8720 and if it is reached it will certainly make us question our situation assessment and probably even reverse the trade.
For now we will wait for the key hour at 19:00 GMT and will surely update you in the comments section if we receive a markedly different result from what we currently expect. Stay tuned to Binary Options Post for the latest batch of forecasts!