Forex Trading - How to Take Advantage of a Falling Euro For Huge Gains

A deteriorating economy and a Central Bank way behind the curve in terms of interest rate cuts points to lower prices. The ECB only cut by 25-bp in April despite a deterioration of euro zone economic figures so the euro zone is now set to be the last among developed economies to come out of this recession.

The economic gloom in euro zone is there for all to see and has been made worse by a strong euro which has smashed exports.

Eurozone unemployment rate in March shot up to its highest level since November 2005 at 8.9% up from revised 8.7% reading in the previous month. The euro zone has more bad data coming up and Q4 GDP drop is set to be small in comparison to the economic contraction in Q1, with industrial production continuing to trend lower, and at a faster rate than the US or the UK. Business confidence remains at all-time lows, consumer confidence is low which has seen demand weaken. In addition, the banking system is restricting the flow of credit to households and businesses.

Deteriorating conditions will force the ECB to act and we may see some quantitative easing from the Bank and just as the UK, US, saw falls after quantitative easing the euro looks set for a month or so of weakness. The whole rise of the euro on the dollar from par to 1.60, was based on interest rate differentials and not the strength of the economy. Now this pillar of support has been eroded the euro looks to be heading south.

So which are the currencies to buy against the euro?

The US$ can be bought providing prices fail into the 1.35 area. This is strong resistance on both daily and weekly charts and if it holds, expect the euro to fall and test 1.30 and then move lower.

The British Pound also looks a good bet. The BOE cut rates far quicker than euro zone and the economy will recover far quicker and this means the Pound should go up on the euro

The places to sell the euro against the British Pound are obvious - you could sell the Euro into the 90.00 level or wait for the euro to breakout below 88.00; if you get in, this trade should trend in the Pounds favor for the rest of the year.

The above combines the supply and demand fundamentals with some great technical levels to trade which offer low risk and high rewards, check them out and see what you think.

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