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Beware of Trading the Euro Forex Markets

Beware of Trading the Euro Forex Markets


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Home Page > Finance > Investing > Beware of Trading the Euro Forex Markets

Beware of Trading the Euro Forex Markets

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Posted: Jun 18, 2010 |Comments: 0
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Greece’s national debt crisis has been discussed at length in every National newspaper in Europe. The fact that Greek debt could be contagious and affect Portugal, Spain and even Italy has also been discussed in detail. Most articles have covered the fact that the problems will weaken the Euro. There is nothing astounding in any of this. At least not until you notice how the various blogs and newspaper articles are covering the Euro angle.

Until recently, all of the Euro-is-in-trouble stories were in the future tense. The problem now is that the articles have, to a greater or less degree, changed to the present tense.

The Euro has been drifting against the Dollar and Yen for some time. It looks like the bears, who have been speculating on the Euro to drop against the Dollar, have got their way. The target seemed to be the .2350/.2450 region and that target has now been achieved.

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Forex speculators are often aggressive though and it looks like they have set the .1600 level as their next target. Articles in some of the leading newspapers across Europe are even predicting parity with the US Dollar.

As Simon Denham of Financial Spreads recently commented, “Parity is not as outlandish as it might appear. Back in 2000-2002 the Euro was well below ‘1 Euro to 1 Dollar’. The historic low was actually .8230 back in October 2001”.

“It should also be noted that in 2008 the European single currency fell from .6000 to .2330, a 23% decline. So far the 2010 collapse has knocked 19% off the Euro/Dollar rate”.

Ordinarily I am a little nervous about forex projections that would push currencies into uncharted territory. Merely going over old ground is not so difficult to accept.

Having said all this though, the more people talk about a particular event occurring in the financial markets the more there seems to be a general correlation with that event failing to occur. It was when the world and his dog started talking about Sterling parity with the Euro a year or so ago that support for Sterling appeared.

If you are looking to trade the foreign exchange markets, either through forex spread betting or margined Forex, you will need to be careful. You are generally trading the markets to 4 decimal places and with the markets looking volatile, and prone to corrections, even small movements can catch out the unwary.

Let’s hope that the newspapers start referring to the Euro’s problems in the past tense and we can all enjoy a little more stability in the markets.

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Daniel Jones
About the Author:

Situated in the centre of London’s financial district, Daniel Jones is a seasoned spread betting professional and commentator on some of the leading financial spread betting sites.

 

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