Currency pairs are some of the most commonly traded binary options assets on the market today; and for good reason. The reality is that currency is the world's most liquid asset. Because currency is so incredibly liquid, we tend to see quite a bit of volatility in the market; leading to several opportunities. However, this liquidity also comes with a dark side. High volatility can make predictions harder to make. Nonetheless, there is one currency pair that seems like it's going to be incredibly easy to make predictions on; at least in the short term. That pair is the EUR/USD. Today, we'll talk about what's happening in each of the economic regions represented by the currencies in the pair and how binary options traders can benefit from the conditions we're seeing. So, let's get right to it.
Economic Conditions In Europe
The Euro represents several economic regions. However, the most important one to watch right now is Greece. If you're a currency trader, chances are that you've heard of the Greek Debt Crisis. Unfortunately, Greece is going to have to pay nearly $2 billion by the end of the day Tuesday. To do so, they are going to need to receive bailout funds from the EU, but it doesn't look like that's going to happen. Recently, the Greek government has been in negotiations with the EU. However, those negotiations are politically fueled and it doesn't seem as though they are going to come to a positive solution in time. As a result, Greece is likely to default. If this happens, they'll have no choice but to exit the Euro. If this were to happen, the Euro would lose value as one of the countries represented by the currency exits.
Economic Conditions In The United States
For the most part, economic conditions in the United States have been steadily improving. However, there is one thing that has kept the USD lower than it could be. The Federal Reserve plans to increase their interest rate by the end of the year. If this does happen, consumers and businesses will need to pay more interest on debts; leaving less money to be spent elsewhere and starting a lull in economic growth in the United States. However, a rumor is flying around financial markets that the interest rate hike may be delayed.
The idea is that the Greek Debt Crisis affects worldwide economic and market conditions. After all, if the value of the Euro declines as a result, ripples will be sent through the worldwide markets. However, if this does happen, low interest rates in the United States will help to ensure that the United States dollar remains valuable.
How Binary Options Traders Can Benefit From This Knowledge
When trading currency pairs, it's incredibly important to remember that the value of a currency is only as strong as the economy it represents. With that said, we can expect that the turmoil in the Euro caused by the Greek debt crisis is likely to bring the Euro down in value. Adversely, if the Federal Reserve does wait to increase United States interest rates, it will result in a stronger dollar. So, with the Euro having high chances of moving down in value and the Dollar having a chance of moving up in value, traders can expect the EUR/USD currency pair to move into bearish mode. This means that the best bet would be to look for the pair to reach resistance. When this happens, we're likely to see strong declines that can lead to profitable put options.
What Do You Think?
Where do you think the EUR/USD is headed? Let us know in the comments below!