Trading a Cheaper Euro

The Euro has fallen to its lowest against the dollar since 2010 and its lowest against the British Pound since 2008. Meanwhile the dollar falls against the Yen. Currency traders may be trading a cheaper Euro for some time to come as the Euro Zone debt crisis and Euro Zone economic contraction continue to dominate the Forex news. Much of the volatility of the Euro comes from the drama of the off again on again efforts by the European Union to come to grips with the collective debts of its member states and shakiness of its banks. In addition, Forex traders ponder just how low the Euro will go if the Euro Zone opts for more substantial stimulus measures by which to bring back employment, avoid a severe second dip to the recession, and prints money as means of doing so. If the Euro Zone prints money in sufficient quantities it will pay off its debts and Forex traders will be trading a cheaper Euro for years to come.

The Future of the Euro Zone

At stake in all of this is the future of the Euro Zone. In order to come to grips with the various debts of the various nations the EU has had to adopt strict austerity measures. There is constant talk of a smaller Euro Zone by pundits and concern by traders about effects on the Euro of a smaller Euro Zone . The day to day drama of German court decisions and repeated summits may drive the Euro in day to day trading but traders are already seeing a future of trading a cheaper Euro as they drive the currency steadily lower. The way out of the dilemma for the Euro Zone may well be to reduce government benefits, reduce the size of government, and reduce the value of their currency. The problem for many nations in the EU is that they cannot do this independently. History is replete with instances of nations devaluing their currency to cope with foreign as well as debt and the effects of inflation. But, any nation in the EU is not able to print Euros, only the European authorities and, since Germany holds the purse strings, that has not happened yet. No matter how fast or slowly things progress the Euro is likely fall due to the financial situation or due to a concerted effort to stimulate the economy and devalue the Euro. Trading a cheaper Euro will be the case either way.

How to Profit from Trading a Cheaper Euro

The issue in technical trading is always timing. How fast will the Euro fall? Will the fall of the Euro in Forex currency rates be gradual or uneven? The typical route for a Forex trader is to trade the Euro against another currency simply to profit from price variations. However, traders can also convert other currencies to Euros in order to take advantage of high Euro bond rates and the possibility of a stock surge as the Euro Zone eventually starts to recover.