How to leverage oil influence on FOREX in binary options trading?

No matter how advanced you are in the financial markets topic, there is no doubt in my mind, that you have noticed that many of the trading markets assets are interconnected. Meaning that price change of one asset influences the price of another asset.

The influence can be direct and indirect and today I would like us to talk about the oil influence on the FOREX market and how to leverage that when trading binary options.

Oil is not just one of the most important natural resources, but also one of the most significant instrument of the economic influence. That is why when trading binary options, you always need to keep an eye on the oil market and price it in when you are making a decision to buy call or put option.

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Oil influences not only Forex, but also gold, for example. But I offer that we have a separate discussion about that. So let’s understand, why oil is so interconnected with forex market?

One of the largest oil consumers is the United States. Despite the fact that the United States is also an oil producer, the demand is much higher that what the country can produce, so they have to do a large-scale purchase of the oil from overseas. If the oil prices go up, the US is paying more and this affects the product prices and purchasing ability of the nation, which in its turn lowers the value of the national currency.

We can take Russian federation as an opposite example. Russia is one of the largest oil producers in the world. In fact, their economy is almost fully based on the oil. Being the largest exporter of this natural resource, Russia is very much dependent on the oil prices. Once they go up, Russia is strengthening its economic position. However, once the prices go down, national currency of Russian Federation, Rubble is getting weaker and going down as well.

Have a look at the example below. These are two screen shots that I took from the Live Graph, which I am using to make technical analysis when trading binary options. What you can see is that when the oil price went down, the USD went up.

oil going down USD going up

I was using the example of USD/CAD as it is one of the most volatile currencies and I really love trading binary options on it as there is always some movement there on which I can make money.

I hope this article was useful for you and next time when trading binary options on forex market you will keep in mind the influence of oil on it.

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