Trading a Volatile Euro

As the European debt dilemma continues trading a volatile Euro may be profitable for those who pay attention. There is an old, tongue in cheek, saying that applies here. The vast majority of success in life belongs to those who simply show up. Follow the fundamentals. Learn to use technical price patterns to your advantage and profit from trading a volatile Euro as the debt dilemma plays itself out.

The European Union is a grand experiment in bringing together the nations of Europe who have too often found themselves at war with each other over the generations. Despite a fair amount of the usual bickering of politics the EU has been a success. However, then came the market crash of 2008, a huge liquidity crisis and efforts by nations across the world to prop up banks and avoid another Great Depression. The EU has been hurt by loss of jobs and mounting debt. The Euro has commonly trended downward and Forex traders have been trading a volatile Euro, not to mention US dollar, ever since.

Although the debt crisis has driven the Euro downward most international companies that either pay or purchase in Euros use options to hedge currency risk. Their interest in the Euro commonly lies on the calendar between the signing of a business contract and payment. European companies also benefit to a degree from a falling Euro as it makes their products more competitive in foreign markets. Companies wishing to buy out competitors, start plants in foreign countries, or purchase foreign made equipment are not happy as a weaker Euro makes foreign based purchases more expensive. Currency speculators on the other hand are not especially concerned with direction in trading a volatile Euro. They simply plan to profit from the volatility. It seems of late that every pronouncement regarding the European sovereign debt dilemma brings a rise or fall of the Euro. In trading a volatile Euro, traders watch both fundamentals and market sentiment using technical analysis of currency pair pricing.

As the Greek part of the debt dilemma grinds to a slow and painful close, Italy and Spain appear to be next on the agenda. The problem now is that Italy is the third largest economy in the EU and too big to bail out according to many pundits. One issue here that is seldom spoken is the high national debt of the USA. Since World War II the USA has often been the lender of last resort. Either directly or through its contributions to international organizations the USA has helped engineer bailouts in Latin America and Asia. Of course the US Marshall Plan was instrumental in getting Europe back on its feet following the war. Now the US has a largely advisory role as its own AAA credit rating was lost following an embarrassing cat fight on Capitol Hill among Republicans, Democrats, and the President. When trading a volatile Euro, dollar, British pound, Australian dollar, or Canadian dollar traders seek to understand the basics behind the value of the currency. Then they look for technical cues. Currency traders understand that the fundamentals determine the eventual value of a currency. They also understand that in trading a volatile Euro or any currency that a degree of market inefficiency follows any change in fundamentals and that market price patterns tend to repeat themselves. Thus traders profit from trading a volatile Euro especially when the Forex news changes daily.