This plan has initiated by the finance ministers of the European zone and under this plan a financial meltdown will be allowed for the Mediterranean island by convoluting the state owned Popular bank of Cyprus that is also known as Laiki and it also includes shifting the deposits under the 100,000 Euros to the bank of Cyprus.

Freezing Cyprus assets

The deposits above the sum of 100,000 Euros that are not under the European Union law would be frozen and used to resolve the Laiki’s debts and recapitalizing Bank of Cyprus with the help of either deposit or equity conversion. As per a statement given by the Eurogroup chairman, the raid on the uninsured Laiki depositors is likely to generate 4.2 billion Euros. This will shut down Laiki bank and affect the job of thousands of people. According to the officials, senior bondholders of Laiki would be cleared out and account holders in Bank of Cyprus would have to contribute for that.

Cyprus government’s comment on the bailout

According to a spokesman of Cyprus government, no tax would be dictated on the deposits in Cypriot banks, though the large account holders would be hit in a far most manner. This would definitely affect the online traders trading in Forex market. An effect would also be seen on the traders that trade in binary options.

When the Cyprus government spokesman Christos Stylianides was asked about the losses that uninsured depositors had to face by the state radio, he told that he couldn’t specify it. He further added that the total loss is assessed to be around 30 percent but that is more of an arbitrary estimate.

One of the measures that are being put in place to facilitate this bailout is the taxation of bank deposits. This move has been seen by investors and traders as a high-risk move that may have an effect on other trading platforms and Eurozone area banks.

Finance ministers in the Eurozone are said to have confirmed that taxation on bank deposits is one of the conditions that are being placed on Cyprus: an implementation that will facilitate the 10 billion Euro bailout. There were talks on Monday that the terms of this proposal could be changed to mitigate some of the effects that this proposal could have on binary trading, stocks and the economy of the Eurozone.

Due to the fears of some of the investors and forex traders, there was a major sell-off of the common currency, and this is what caused the plunge that was experienced.

The trading results that were announced at 11:25 A.M (JST) in Tokyo, Japan showed that the EUR/USD paid had shed as much as 1.4% from the late day trading of Friday, March 15. This translates to a drop of the price to $1.288 a piece. A price as low as this was last seen in early December 2012.

Right before the announcement of the bailout, the pair was trading at $1.289. The effects were also felt on the EUR/JPY pair, which fell further than the EUR/USD pair to trade at a loss of 2.2% at 122.20 Yen.

There are several reasons that this has taken place. Or primary importance is the fact that investor sentiment has begun to look favourably upon the Eurozone.

Many astute traders have expressed their growing confidence that this multinational economy has been through the worst.

These feelings are bolstered by positive German industrial output data as well as increased solvency within many sovereign banks.

This, in turn, has caused many binary traders to look upon the euro as a safer investment than it has been in the past. Indeed, the euro itself has touched upon an eleven month high in relation to the dollar and some traders see this strength as a real indication of economic progress.

On the other side of the Atlantic, domestic concerns within the United States are set to further widen this gap. The economic figures recently released indicated a surprise downturn.

The economy shrunk during the fourth quarter of 2012 at an annualised rate of .1%. Many online traders were not expecting such gloomy figures and these, in turn, may signal a more bearish market for the dollar in the weeks and months to follow.

Binary traders may seek to take advantage of this widening gap and perhaps enter into short term ventures to capitalise on any inter-currency volatility. While this may appear risky to some, the all-or-none aspect of binary trading will allow online investors to profit from discreet directional movements.

As many see the euro continuing to gain momentum, a short to medium-term investment in this multinational currency may represent a real hedge against the volatility of the dollar.

There are two main factors which have contributed to this rise on the Forex trading markets; binary options traders taking particular advantage of the rise in the greenback.

The first variable which needs to be addressed here is the headway gained in reference to political negotiations concerning the upcoming fiscal “cliff” so often referred to in recent times. Although much work still needs to be done, the short-term rise in the dollar is seen as a reflection of Forex traders’ hopes that a resolution can be reached shortly.

A second factor of perhaps more longitudinal importance is the fact that hopes exist that domestic holiday sales will echo a stronger economy than the previous year. If we finally add in the recent positive jobless figures in the United States, binary traders are inclined to favour the dollar.

The second variable of importance is the slowdown in global growth. This has turned many binary traders to exercise their options to utilise the US dollar as a hedge against the perceived stagnation of the global economy. Factoring in a fragile Eurozone and the potential for Spain to ask for a full sovereign bailout from the ECB it is easy to understand why binary traders are inclined to invest in the dollar, even if for short term profit taking against other benchmark currencies.

As binary Forex trading is viewed as the safer option in a fluid economy, the week ahead will most likely see continued interest in the dollar. This may be especially true if the rumours of Spain’s full bailout are further substantiated.

These measures must be approved should the financially stricken country wish to receive the latest bailout package. This sentiment is further entrenched amongst the more bearish investors who feel that even should this package be approved, it is only a matter of time before Greece exits the Euro.

While many binary forex traders have taken a watch-and-wait stance for any eventuality with Greece, their attention is also beginning to refocus on Spain. Much of the pressure of an imminent bailout seemed to be alleviated after investor confidence caused bond yields to lessen well below the seven percent threshold, yet still anxiety remains.

This is mainly due to certain autonomous regions such as Catalonia threatening to leave the nation. Should this happen there is a fear that other provinces may follow suit and such volatility would have dire economic consequences on Spain and an already fragile Euro.

A third factor which has kept the Euro and the dollar trading within tight ranges is the anticipated outcome of the elections currently underway in the United States. For binary forex trading in the western hemisphere, a return to positive sentiment may yield short term bullish results on the dollar. For this reason trading has been relatively light and with tight margins until the outcome is clear.

Many believe that the election of either candidate may trigger such an upswing in the dollar. In theory this may represent a situation where the binary trader can take a short term profit on the dollar’s rise. Still, should confidence return to the Euro after the Greek parliamentary vote, a reversal may occur and the Euro break out of its eight week doldrums.

This past week has witnessed a handful of developments which show strong indication that not only is the threat of a fiscal breakup more serious now than ever before, but there are also some beginning indications that the European Central Bank is becoming aware that the time and monetary allotments given to struggling countries such as Greece may not be enough.

Although some ECB board members hinted that there may be room for renegotiation in terms of the next tranche of funding for Greece, Germany has held firm that Greece must still meet the stipulations laid out in the previous debt package agreement. Moody’s now sees a one in three chance that Greece may be forced to leave the union and has urged other countries to consider the implications should this scenario become a reality.

Additionally, alarming developments in Spain have caused investors to further contemplate their long term trading positions. Although Spain’s finance minister has plainly denied the need for a rescue package many forex analysts see a bailout as all but inevitable. As Spain’s prime minister Rajoy continues to struggle with the implementation of fierce austerity packages, social and political unrest has gripped the country’s region of Catalonia; many Catalans now seeking independence. This is further indicative of a weak economy and unemployment levels of over twenty-five percent.

Binary forex traders should continue to expect a sideways movement of the Euro/Dollar relationship but should economic developments in the weeks ahead follow their course, the currency may lose value once again. This may present a short term buying opportunity for those seeking to capitalise on continued European instability across the continent.

Spain’s 2013 budget

One major factor which will not only play directly into Forex trading but affect overall market sentiment is the impending announcement for Spain’s 2013 budget. Most expect further austerity measures to be put in place; possibly causing yet more political and civil unrest in the country. Furthermore, analysts are beginning to agree that any further fiscal cuts represent an inevitable prelude before Spain formally requests a bailout from the ECB. This, of course, brings back familiar memories of Greece’s funding only on a much larger scale. Should this likelihood indeed turn out to be fact, many traders are bracing for a major pullback in the value of the Euro. However, improvements in bond yields in the European market signal that any formal bailout request may still be considerably far off and that the Spanish Prime Minister Rajoy is seeking more time to help rectify his country’s finances.

More forex traders than usual now looking at binary options

Many Forex traders are considering utilising binary options as a safer alternative due to their “all or none” nature. Considering these options are mainly web-based, traders worldwide have the added advantage of real-time reactions to any sudden or perceived impending currency movements. Nonetheless, as the Spanish budget announcement looms, lower trading volume and less volatility can be expected to continue for the near term.

This is a short introduction to how to trade binary options. Binary options is also known as digital options or fixed return options.

Binary options are sort of a hybrid between traditional options and fixed-return financial instruments. Digital options are simple, and they are ideal for the trader who wants the potential for significant, short-term gains with a strictly limited risk.

This means the investor who trade binary options can know immediately and exactly how much a trade will yield or lose. A binary option allows you to form an opinion on whether a specific outcome will or will not occur. They can only have one of two possible outcomes. Unlike a spread bet a digital option does not require margin, no stops and you know the exact maximum risk and maximum profit. Binary Options trading allow you to take a simple “Yes or No” approach ( or Above/Below) on whether an outcome will occur.

Example of binary trading

For example, will the GOOGLE close up on the day at the expiry time? If “Yes,” the Binary option settles “in the money” If “No,” the Binary option settles “out of the money”.