If the Euro Falls: How to Play It

Do you remember when everyone hated the U.S. dollar? Not saying the U.S. dollar is immune to devaluations, but the Euro might be at risk of falling. So ok all you online currency trading professionals: Should you go out and short the Euro? Well, look at these facts:

1. European bank losses from the financial crisis are now estimated to supercede the U.S. banks’ losses.
2. Since losses at European banks are set to increase, will they be able to lend? Probably not!
3. The IMF projects the European economy is set to contract 4% this year.That's worse than the 2.8% contraction for the U.S.
4. Labor protests have become more violent and common in Europe (France).
5. Standard & Poor’s predicted that debt defaults among high-risk European companies would overtake defaults among low-rated U.S. companies.
6. The EU Central bank was slow to react to the crisis and has cut interest rates much slower than the rest of the world. The ECB cut its key interest rate to 1.25% from 4.25% only in the fall. Possibly the only reason the Euro has not fallen is because those rates are still well above comparable rates in the U.S. and U.K.
7. The European economy faces further greater risks and worsening deterioration because of the deep economic and financial crises in the formerly communist Eastern European countries.

So taking those fundamental reasons, there is good cause for the Euro to fall. So how do you, the forex currency trading professional, play this? Maybe you are not a professional and need to learn. There are many forex training programs from which to learn technical approaches.

I am sure many think currency trading is easy… However there are huge risks due to the leverage involved. It is not prudent to purchase any forex software or forex system to trade forex. There is a learning curve. One does not become a doctor with a course. It all takes time and knowledge.

Once you have the knowledge, start small. There are many banks and brokers which offer currency exchange trading. One can also do forex currency trading via ETFs. Another suggestion is to find a forex broker that are has forex trading online but again, only after you have learned.

Forex currency trading can be profitable but there are risks. Now is a good time to gather some education on trading techniques as potentially the Euro Dollar might experience problems in the future. Good luck with your trading.

Comments

[morph366:]

It's good to underline the fact that for traders starting out in forex, or any market, there is a steep learning curve. As someone who has done some mentoring for new traders I would concur that -"One does not become a doctor with a course. It all takes time and knowledge."

Only comment about relying on fundamental analysis is that it's very hard to get an edge since everyone else is aware of the same fundamentals and, to go back to your discussion of the euro, the market has already priced in the factors you cite.

Everyone has to find a style that suits them and in forex trading there are lots of intraday patterns that, when properly identified, can lead to short term opportunities

Apr 24 12:10 PM

[bricki:]

Yes, the Euro Zone is in economic trouble, but it is hard to tell if the breath and depth of that is really worse than what is happening in the US.

What is clear though is that European central banks are less likely to print money as fast as the Fed is doing. Part of that is greater fear of inflation, and in some part the stronger social safety net makes unemployment easier to bear if you live in a European socialist democracy. Two things are likely to result from this:

1. Lower inflation of the Euro. This to me suggests that the Euro is not likely to fall dramatically against the dollar.

2. Slower economic growth in Europe. That probably translates to lower imports and demand for resources from Europe. And again lower inflationary pressures.

Apr 24 02:33 PM

[$OMALIA:]

EUR thumbs up.

Apr 25 07:50 AM

[dcb:]

I think the ECB response to the crisis supports the currency. I think the fed response kills the dollar. we get away with bad things because we are the us, once THE RISK AVERSION TRADE IS PLAYED OUT BYE DOLLAR.
You also need to look at what is happening with regulation in the EU. no mark to fanasy, and they are making real reforms unlike the US.
the net result will be more stable and higher valued euro over the dollar, but european markets (stocks) will under perform. But, they won't have as much as a boom/bust cycle as the US (more stable).
US will outperform in good and contract more in bad. That is the future, now the world isn't ready for that. It will be the next crisis and I will be willing to bet the US will be at the center of it again. Watch out though, because we aren't going to be as much as a safe haven anymore when it happens!!!

Apr 25 09:23 AM

[easydialog:]

THE EURO ZONE IS A DISASTER. NOT JUST SINCE YESTERDAY. IF YOU DRIVE THROUGH EUROPE YOU GET THE PAIN OF OVERPAYING EVERYWHERE. STARTED FROM RIDECOULSE HIGH FUEL PRICES, TO LOUSY HIGH PRICED HOTELS AND SO ON. YOU DONT GET WHAT YOU PAY. ANOTHER MEGA PROBLEM IS THE OVER IMMIGRATION. SOMETIME YOU DRIVE OR WALK THROUGH PARTS OF TOWN, YOU THINK YOU ARE ON THE OTHER SIDE OF THE PLANET BUT FIND YOU WALKING THROUGH ANTWERPEN. THE EURO SHOULD BE ALMOST HALF OF PRICE AGAINST THE SWISS FRANC IN TERMS OF NUMBERS. BUT NOT JUST THAT, ALSO THE PRICES WOULD HAVE TO FALL ANOTHER 50 PRECENT FROM THERE. SO, EITHER I AM TOTALY WRONG OR THERE IS A BIG BANG AHEAD. GOOD LUCK, EU
STEVE SCHNEIDER, WWW.EASYSTOCKDATER.COM

May 21 05:45 PM

[micha100:]

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Nov 16 11:11 AM