Seemingly never-ending political turmoil has created a lot of uncertainty in many trading markets, but when it comes to forex, there is a level of predictability. Wise traders looking beyond the USD and GBP will have found a German economy growing slowly at 1.5% and a weak euro attached to this plight. What this shows is, despite the machinations of global policymakers creating headline-grabbing policy blunders and trade wars, there remains the everyday events of countries and a great deal of opportunity to be had along with it. A savvy forex trader stands to make big gains if they can look past the chaos and search for predictable, safe trends, peaking with big year-end wins in the euro.
Indicators for the euro
The European stock markets are currently enjoying a rally due to signs coming from Britain that are making Brexit look increasingly unlikely. According to US News, the European stock markets rose 8% on the back of May’s deal defeat, signaling good times on the continent. However, this masks some important factors in the wider European economy and economic policy.
First off, there are impacts soon to be felt by forex traders directly. For safe and profitable trades, high leverage has been routinely touted as an important measure by industry insiders, including ConnectFX (connectfx.org/forex-brokers-highest-leverage/). The new ESMA regulation puts in stringent blocks on leverage, reducing the level to, at maximum, 30:1. While this is an effort to foster more responsible trading, it could also hamper profits. Secondly, look at the overall economy in Europe. Telltale signs are on the horizon that there could be a relative drop in GDP; the Italian banks in particular are a bellwether.
Looking towards history
Aside from current world events, there’s solid evidence to suggest that the euro is a great choice for traders looking to ride the yield of gains and losses. As a relatively volatile currency – 2000-2008 saw its value fluctuate by 80c to the dollar, according to MacroTrends – you can be sure that there will be more events on the horizon that give you the opportunity to strike gold on the euro forex markets. Furthermore, with the best trading hours ending around 2000 GMT, American traders aren’t put out by day trading on the currency. This is in stark contrast to the Yen and various South Asian currencies.
Coming out of a slump
The big lure of the euro is seen over a two year period. 2018 saw the dollar undergo an unprecedented surge, according to Reuters. Despite this, 2019 will end with the euro on top once again in relative terms, with Reuters’ analysts predicting a rise from $1.13 to $1.20. The reasons for this are varied and include the possibility of a US recession and the possibility of an interest rate hike as earnings across the United States continue to rise. Whatever way it spins, a strong end to 2019 for the euro is likely to be a reality. For a forex trader, this plots an appealing and straightforward course through the year; right now, it’s likely that you’ll see a weak euro that benefits those looking to buy now. Holding onto reserves will see you well through the end of the year, where you can re-assess again following the sell off.
The forex market is typically volatile and will remain that way until some of the world’s big political questions have answers. Through the madness, it’s important to look objectively at currencies. The euro is one that will benefit a savvy trader through this method of analysis.
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