Euro Vs US Dollar: The Winner Is Not Good, Just Not As Bad

I’m sitting here watching a completely flat trading day (Friday) once again for the EUR/USD pair. The most heavily traded currency pair in the world is caught in a battle between which economy is worse. And right now, there is no winner. While it looked like the US dollar was destined to fall after the news of the $700 billion bailout that mainly went to banks, the Euro did not advance on this news. The reason is that European countries started to give investors a bit more transparency, and they realized that Europe has just as many problems as the US.

I’m still on the fence on whether or not I like the government helping and essentially taking over a large chunk of our banking system. I know this package was necessary or the very foundation of small businesses in your community would crumble leaving a bigger mess than we ever imagined. My new focus is on how long this will take before we are back to normal and seeing standard index funds giving investors a return on their money.

I have a gut feeling that the EUR/USD pair will stay in a cyclical trading range through the end of November as nations begin to reveal and address their problems. Long term traders of the EUR/USD have been a bit spoiled with the great Euro run until July 2008. And these same traders turned around their positions and absolutely killed the market by buying and holding US dollar. Just one of the reasons that the forex market is so appealing.

My personal sentiment is that I will be no where near the EUR/USD pair until we see a breakout in either direction. I’m much more interested in volatility right now while it’s still there. And believe me, there’s a good chance the boat could rock a lot more in 2009.

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