One of the biggest topics in the investing realm recently has been the Greek Debt Crisis. Greece has for quite a while now, and this time, they simply couldn't dig themselves out of the hole. Greece has defaulted on $1.7 billion in debt; and while the country continues to spiral out of control, I'm expecting to see big movements in the currency market. So today, we'll talk about why Greece wasn't able to avert a default, what it means for the currency market, and how binary options traders can benefit from the news. So, let's get right to it.
Why Greece Defaulted In The First Place
Greece has been largely dependent on bailout funding from the EU and IMF for quite some time now. However, their most recent bailout came with stipulations with regard to economic reform. Greece would negotiate a reform strategy with the International Monetary Fund and European Union in order to get the much needed funding from the bailout. However, those negotiations simply didn't turn up positive news. While the IMF and EU were looking for higher taxes, Greece's Prime Minister made it to office on promises of keeping taxes as low as possible; and ultimately refused to meet the requirements set in place to continue the bailout. This led to the country's inability to pay $1.7 billion to the International Monetary Fund; ultimately sending Greece's economy spiraling out of control.
How This Is Likely To Affect The Currency Market
Greece is part of what I believe to be a fundamentally flawed currency, the Euro. However, with their default in mind, the country is quickly spiraling out of control economically and will now be forced to print its own currency to pay government workers and debts. If this happens, the country will no longer use the Euro; and that's a big change.
With a Greek exit from the Euro, currency pairs including the Euro are likely to see quite a bit of volatility. After all, the Euro is going to fall as an entire country cuts ties with the currency. Therefore, currency pairs with the EUR symbol first are likely to decline overall and currency pairs with the EUR as the second currency are likely to see gains as the Euro weakens in value.
How Binary Options Traders Can Benefit From The News
As stated above, Greek has little to no choice now, but to leave the Euro. When this happens, the Euro is likely to see major declines; causing movement in the currency market that you have the ability to profit from. What you'll need to do to profit depends on which side of the currency pair the EUR is on. Here's how it works…
EUR In Front – Currency pairs with the EUR first are likely to see declines as the Euro declines in value. Therefore, you'll want to watch for resistance; purchasing calls when the price meets this point. From there, the declines should leave plenty of room for profit.
EUR In Back – If the EUR is the second currency in the pair, we can expect to see increases in value as the value of the Euro declines. With that said, on these pairs, traders should look for support. When the price reaches this point, there will most likely be a rally; leading to strong gains.
What Do You Think?
How do you think the Greek Debt Default will affect EUR currency pairs? Let us know in the comments below!