subject: Forex Trading And The Eu, Euro, And Greece [print this page] Forex trading has been unpredictable recently because of Greece's debt crisis. Some are afraid that this problem will spread to other European Union countries that have a lot of debt such as Spain, Portugal and Italy . As a result of what has happened , against the US Dollar the Euro currency has dropped about 11% . When looking at this situation we need to ask ourselves the following questions : Is the Euro sell off complete and is the strength in the US Dollar because of the United States strong fundamentals or the Euro's weakness? The reason these are important questions is because the answer to the second one will greatly impact how we answer the first .
My take is that the US Dollar currently is benefiting because of Euro weakness and Euro weakness only . Steam has only been picked up in the spending driven US economy because for some time the rates have been near 0% from the Federal Reserve . What will happen when the Fed is forced to raise rates ? Will the US economy be able to withstand that kind of head-wind ? More than likely, no. Also, it is important to keep in mind that consumers are spending more right now because many consumers are simply walking away from other payments, such as mortgage, auto, and credit card payments. This allows consumers to have more income than usual so they're able to spend more on other items such as clothing, new electronic items, and meals out . Again consumers are going at it like crazy. It wasn't sustainable in the last Federal Reserve inflated boom and again, it won't be sustainable. Inflation or default are the only two options for the US Dollar in the next several years and those two things can only mean disaster for the Greenback .
When doing forex trading our goal is naturally to make money . There is no bias . We only want to use our foresight for a profit . So the second question's answer is that there will be a point when the Euro bottoms out because it has been over sold. It will probably be somewhere about 1.2300-2400. After all , do you think Germany, the third largest economy in the world , will allow the currency to fail? Probably not. More than likely they won't. This is the reason they aren't printing out more Euros and helping with a Greece bailout . The problems in Greece will cause the Euro to become even more sound as a currency. Investors around the world will know that there is safety in the Euro because when they face problems they will deal with a loss in the short term to preserve their health in the long term . Thus , their economy may be taking a beating , but their monetary unit will be better for all of this . The opposite is true in the United States situation . Money is being printed to avoid short term problems , but this only causes a problem with the long term health of our money and economy .
With all of that said , we soon will be to a point where you will get a great bargain from the Euro that you should take advantage of in your own forex trading. Not just for the previously mentioned reasons, but simply take a look at the market psychology. The professionals are always buying the market in free-fall just as the average person is catching wind of the crisis and comes in off the street to go short the move that has already happened . Already this pattern has happened over and over again, and will continue to repeat itself as long as the limbic system plays a part in human physiology .
