What’s Going on With the Euro?

Which way to Trade the EuroThe euro has had an interesting, yet tumultuous–time as of late. Europe has been faced with a lot of political turmoil, mostly having to do with Russia/Ukraine relations. However, you may have noticed that the effect goes far beyond one currency, and is affecting currencies all over the world. And right now, it’s not the euro that is being the hardest hit, but rather the Japanese yen.

The yen is falling because right now, it is the weakest currency of the major three. The euro, despite all of it’s problems, has a stronger economy at the moment, and the U.S. dollar is also being backed by a relatively strong economy. So, now that the Ukraine and Russia are having negotiations, an added element of political stability is being added in Eastern Europe. This has strengthened major currencies by adding confidence, and has weakened others. The yen seems to be the biggest one on the losing end of things.

This brings up two important points.

The first is that the exchange between two currencies is very delicate. Price changes are often relative to other countries, and not necessarily indicative of where that country is in relation to itself. The yen was at a high point for the last 3 weeks against the dollar before it started losing ground. Not a lot has changed in Japan during that time, but the rest of the world has seen some differences, and the yen is bearing the brunt of that. It doesn’t necessarily mean that Japan’s economy is changing, just that others are changing more.

The second point is a big one: the U.S. dollar is still the fallback currency for most of the world. When a safehaven is needed, unless there is some sort of crisis going on, the dollar is usually the preferred choice. This is good news for those that like trading currencies, because it means that more often than not, going long with the dollar is the right choice. The gains might be small, but they will be consistent as long as the economy is chugging along like normal. It provides a sense of direction for Forex traders, and although it won’t always happen, it should be pretty predictable when it does.

This leads to a sidepoint. Traditional Forex brokers will often charge a fee to traders if they leave a trade open for too long. It gives an advantage to day traders, since they will never have a trade open over night, and it takes away profits from longer term currency traders. There is an alternative, and binary options help to overcome this. A lot of brokers focus on ultra-short term trades, like 30 and 60 second timeframes, but many brokers also offer long term trades that border on investing, such as month and year long binary options. If you are better at long term trading than the short term day traders, binary options have fewer upfront expenses than the traditional Forex market. And because profit rates are usually just under 80 percent for these trades, there is a good chance that you can make a bigger profit with just one trade over the course of a month or year using binaries.

Of course, this is dependent upon your approach and the amounts you will be risking. But, even considering all of these things, binaries can be very effective when used in conjunction with traditional Forex trading. It adds another layer to your portfolio, increasing diversity, and lowering the amount of risk that you assume at any one point. This can be very effective when it comes to your long term stability within the markets.