Currency pair prices generally do not like negative news. The currency linked to the negative press slips against its partner in each of the currency pairs that it is part of. And, the worse the news becomes, the more volatile the Forex market grows. This phenomenon is not unique to the Forex markets. It plays a significant role in increasing global financial market instability,
The French fuel protests are no exception to this rule. These protests started around the middle of November 2018, where French citizens marched against the rising fuel levies.
The protests quickly grew from a march to oppose the increase in diesel fuel levies into a movement where rioters wearing yellow jackets showed their displeasure at the overall increased cost of living.
According to the bbc.com news dated 25 November 2018, protestors clashed with police, and “there was chaos on the Champs-Elysées on Saturday [24 November 2018] as police used tear gas and water cannon to disperse protesters.“
Succinctly stated, these riots escalated into other parts of France and continued until Macron, the French president scrapped the controversial fuel tax on circa 6 December 2018. This followed weeks of the worst rioting France has seen for decades.
The Euro and the French protests
As mentioned above, currency pair prices are susceptible to adverse news events. In this case, as the Euro is the French currency, it would have slipped against its other major currency partners: the USD and the GBP.
Additionally, unless a single news event like these protests is the only negative news, other news events will mitigate the relevant currency slide. In this case, there was negative news around the Brexit deal from the UK. Also, the continued US/China trade war would have kept the USD under pressure.
In fact, www.dailyfx.com reported on 13 December 2018, that the French riots had weakened the Euro against the USD currency pair price. And, the EUR/USD forecast is that the Euro will remain under pressure because the French riots are not only about rising costs. They show that the French people have lost faith in their president. And, they are unlikely to stop rioting until they get what they want.
Essentially, the first time they rioted, Macron gave in and promised increased wages and increased government spending. However, this is likely to force the budget deficit/GDP ratio to rise above 3%.
European Political turmoil: How to trade in this market volatility
The French protests are only one part of the political instability that threatens to plague and is plaguing Europe at this time. The Brexit turmoil and the Theresa May’s inability to push her deal through the House of Commons continues to feature in the news.
Furthermore, there is an increased chance that Britain will opt for a no-deal exit. This, in itself, is placing tremendous pressure on the GBP. It’s currently hovering around 20-month lows; the lowest it has been since the announcement back in 2016 that the Leave Campaign had won the Brexit referendum.
Therefore, the question that must be asked and answered is not whether you should trade within this global market instability. But it is how do you trade when the market conditions are extremely volatile?
Here are a few tips to help you trade profitably during global financial market volatility:
Choose your CFD broker carefully
Signing up with a poor online CFD broker that does not prioritise trader success and profitability will ensure that you will not place profitable trades. And, this will ultimately result in the loss of your entire investment if you continue to persevere with this broker.
Plan your trading strategies precisely
It is important to note that, at this juncture, that trading CFDs relies on an underlying asset’s price movements and not on buying and selling the asset itself.
Therefore, it is crucial to study the historical price movements using technical indicators and oscillators like the Relative Price Index, Bollinger Bands, and candlestick charts, to ensure that you forecast future price movements as accurately as possible.
As mentioned above, it’s possible to trade profitably in volatile market conditions. The salient point here is to ensure that you give yourself the best possible chance of succeeding by studying the technical indicators and the fundamental news events that will impact the price of a related asset.