Oil has been a very interesting commodity to watch over the past year or so, and for good reason. The Federal Reserve has made its decision with regard to its interest rate, and this is adding hope to an oil recovery. Today, we'll talk about the Federal Reserve's decision, why I don't think a full fledged oil recovery is going to happen, and how binary options traders can take advantage of the trends. So, let's get right to it…
The Federal Reserve Keeps It's Interest Rate Unchanged
The Federal Reserve has been a major topic of conversation throughout the year 2016. In December of 2015, the Fed announced the first interest rate hike in nearly a decade. However, that's not the only announcement the Fed made. It also said that it would be increasing its interest rate between 2 and 4 more times in the year 2016.
Throughout the beginning of the year, the Federal Reserve has not been able to make this move. Unfortunately, economic conditions in the United States and around the world have hindered their plans. However, some believed that an interest rate hike would be coming after this week's FOMC meeting. Nonetheless, the Fed announced that it would be keeping interest rates unchanged once again.
What Does This Have To Do With The Price Of Oil
At first glance, it seems as though oil and interest rates are two separate topics. However, they really are one in the same. You see, oil, like most other commodities, is priced using the United States dollar. As a result, when the dollar climbs, the cost of oil rises in nations outside of the United States. Adversely, when the USD declines, the cost of oil becomes less expensive in nations outside of the United States. As a result, when the USD rises, demand for oil tends to decline, leading to declines in price. Adversely, when the USD falls, demand for oil rises, leading to gains in the value of the commodity. So naturally, we're seeing strong gains in oil at the moment.
Don't Get Your Hopes Up For An Oil Recovery
While things look promising for oil at the moment, if you're hoping on a recovery in the market, you might want to change your opinion. The reality is that globally, production of oil continues to climb. This is causing the supply glut that started the oil crisis to continue to grow. At this point, demand may increase. However, there's no way that it's going to increase enough to cut into the massive supply glut we're seeing in the commodity around the world. With that said, I'm expecting for the gains we're seeing at the moment to be relatively short lived.
How Binary Options Traders Can Take Advantage Of The Trends
As binary options traders, it is our job to spot trends and take advantage of these trends for a profit. In this particular case, there are several opportunities being created. At the moment and in the short run, binary options traders should be watching for strong call option opportunities in order to take advantage of the gains we're seeing in the market. However, as mentioned above, I'm expecting for the gains we're seeing to be relatively short term. As a result, binary options traders should watch closely for a reversal because when it happens, it's going to come with strong momentum; opening the door for profitable put option opportunities.
What Do You Think?
Where do you think oil is headed moving forward and why? Let us know your opinion in the comments below!
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