Forex Trading

Forex trading has been quite volatile lately because of Greece's debt crisis. Some are afraid that this problem will spread to other European Union countries that have a lot of debt like Italy, Portugal, and Spain . Because of what has occurred , the Euro currency has plunged nearly 11% against the US Dollar . There are a few questions we need to ask as we look at this situation : Is the end of the Euro sell off here and is the US dollar strength due to United States strength or Euro weakness ? The questions are very important because the answer to the first question will be impacted by the answer to the second one .

My take is that the US Dollar currently is benefiting because of Euro weakness and Euro weakness only . The US consumer spending driven economy has only picked up steam because the Federal Reserve for some time has left the rates near 0%. What will happen when the Fed is forced to raise rates ? Will the economy in the US be able to deal with this ? More than likely, no. Also, it is important to keep in mind that consumers are spending more right now because they are not paying credit card payments, automobile payments, mortgage payments, and more . This allows consumers to have more income than usual so they are spending more in other areas such as clothing, new electronic items, and meals out . Again consumers are going at it like crazy. It wasn't sustainable in the last Federal Reserve inflated boom and it will not be sustainable this time . The only options for the US Dollar in the next few years are default or inflation and both will mean disaster .

When doing forex trading our goal is naturally to make money . We have no biases. We simply want to profit from our foresight . Thus, the answer to the second question is that there will be a point when the Euro bottoms out because it has been over sold. It will probably be somewhere about 1.2300-2400. In reality, do you really believe that Germany, one of the largest world economies, will allow the failure of their currency ? The answer is, "probably not." This happens to be why they are not printing even more Euros and helping Greece bail themselves out. The problems in Greece will cause the Euro to become even more sound as a currency. Investors will know that the Euro is safe because when there is trouble they will deal with a loss in the short term to preserve their health in the long term . Thus , their economy may be taking a beating , but their unit of money will end up being better. The situation in the United States is just the opposite. Money is being printed to avoid short term problems , but this leads to

problems with the health of our economy and the US Dollar.
All that being said, we are getting close to a point where the Euro will be a massive bargain that you can take advantage of in your forex trading. Not only for the reasons we've talked about , but simply take a look at the market psychology. The professionals are always buying the market in free-fall just as the average person is catching wind of the crisis and comes in off the street to go short the move that has already happened . Already this pattern has happened over and over again, and will continue to repeat itself as long as the limbic system plays a part in human physiology .