The euro is at a nine year low right now. The bad news out of Europe keeps getting worse, and the fall in oil prices hurt the euro much worse than it hit the other three major currencies. Besides this, there are a number of factors weighing down the euro, but one of the big things on the horizon is the fact that Greece might cease use of the currency. While the poor Greek economy has not been good for the euro’s stability, if Greece leaves, the effect might be even worse.
The problem is that this isn’t that far off in the future. Greece is holding elections near the end of January, and this could make a big impact on what the country decides to do. If the government decides to exit, the already fragile euro could sink even further. It’s too early to tell right now what’s going to happen either way, but this is definitely something to stay on top of. Either way, the euro can’t stand dropping much lower, and it’s very likely that the ECB will continue to implement stronger methods to try and boost the currency that supports the majority of the Eurozone.
A lot of people believe that Europe is strong enough now to withstand Greece leaving, but the economy currently says otherwise. Yes, a lot of Europe is domestically strong, but when it comes to internationally, this is not the case. Others believe that Greece is responsible for dragging the euro down so heavily, and that once Greece is out of the economic picture, the euro will recover very quickly. This might be the case, but it’s unlikely that it will proceed this smoothly. Greece’s debt crisis in 2009 was one of the main catalysts for the current situation, but the problem has actually become much less severe since then, despite the fact the the euro is worth less now than it was at the height of the original crisis. A lot of this is actually due to the fact that other currencies–mostly the U.S. dollar–have gotten much stronger since then. This is how currency trading works a lot of the time; an economy can get stronger, but if another currency has more momentum on its side, the first strong country will see its currency weaken comparatively. Usually, this will balance out over time. Unfortunately for the euro, it is taking a lot of time to get to that point.
For most people, this information would be a strong signal to go long with the euro for the foreseeable future, but that strategy simply doesn’t work in Forex trading. Yes, there’s more room for the euro to go upward than downward, but a lot of Forex brokers charge fees if you hold a position overnight, and this basically makes it so you must day trade when you go with a traditional Forex broker.
Other choices do exist, and this is one of the few instances where binary options are better for long term trading than other types of trading. Most people that trade with binaries like day trading since it is a much cheaper alternative than other methods of this fast paced trading. However, some brokers will allow you to take a year long approach to the euro, and since it’s the beginning of the year, this gives you quite a bit of time to examine the relationship between the euro and other currencies. It might be too early to take this route, but the fact exists that if you want to do it, it will be much more cost effective than it would be to use a Forex broker.