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Despite The Turmoil, Euro Soars

To say that the European economy as a whole and the ones of the most battered countries are still far from a healthy recovery, would be an understatement. There has to be a reason for why EURUSD is trading at the 1.37 handle and binary options traders are the ones who should be keen on finding an explanation. The accelerated surge can be explained in more than one way, but a definitive conclusion is yet to be found on how this currency pair will fare in 2013.

Fed policies drives the dollar down

Bernanke has confirmed the fact that the Fed has no intention to put an end to its string of quantitative easing and will keep buying $85B per month until the unemployment falls below 6.5%. The problem is that the number of new jobs created each month is well below expectations and it is hard to believe that the Fed will achieve its goal soon. If we were to look at this matter exclusively through QE measures and effects it might seem like the dollar will keep losing worth in the upcoming weeks and even months.

The Fed and ECB follow divergent policies because the European Central bank keeps shrinking its balance sheet, while its American counterpart expands its. In theory, if the two financial institutions stick to this strategy, the gap between the Euro an the USD will get wider. The projections for 2013 in terms of new jobs created by the US economy are encouraging and indicate an average of more than 200k jobs. Binary option traders should bear in mind that the authorities don't hesitate to tinker with the numbers and the adjustments artificially add new jobs.

A strong Euro will come back to bite the EU

It is easy to celebrate the appreciation of the Euro and binary options traders can even make profit by buying call options with a relatively short expiration date. On the long run though, a strong Euro will only make it more difficult for European countries to export goods abroad and even Germany might suffer as a result. Spain and Italy are already struggling with high unemployment and the auto production has dropped in both countries.

By contrast, things are moving into the opposite direction in the US and this is only the most obvious example for highlighting the perils of a stronger Euro. As unemployment rises and protests get more numerous and more vehement, these economies will drag the Euro down. Binary options traders can afford to back the European currency on short term, but should be extra careful with positions that have a distant expiration date.