While Brexit continues to rock the European Union, the world is holding its breath in anticipation of a domino effect … might Italy be the next country to exit the bloc or is that a truly outlandish prediction? Let’s look at what might happen if Italy were to follow the UK’s lead. After the UK’s exit from the EU was announced, we all witnessed the price of GBP plummet to a 35 year low. Now the possibility of “Italy leaving EU” is hitting the headlines, triggering volatility. While many traders are conflicted when it comes to a 2019 euro dollar forecast, read on to discover why an Italian exit might not be all bad news.
Did you know that forex traders can benefit from financial instability?
The euro dollar forecast if Italy exits
After a prolonged period of frustrating negotiations surrounding the Italian budget for 2019, Italian prime minister Giuseppe Conte finally announces that enough was enough.
The fallout from Italy leaving the EU would shake the bloc to its core. The European financial markets would tumble. The EURUSD exchange rate would likely nosedive by more than 10% in a single day. A tragedy in the making? Perhaps, for some, but not for forex traders in search of trading opportunities.
The first effects of leaving the EU
In Italy, uncertainty would spread like wildfire. The entire nation would question what would happen to euro bank accounts after Italy’s move back to the lira. Would the government take the opportunity to confiscate some wealth through creative conversion rules?
Such fears would set the stage for a run on the banks. People would hurry to move their euros to a mattress stash. The fear and negativity would influence market sentiment and create a self-fulfilling prophecy of sorts.
Banks would see an avalanche of euro withdrawals if Italy were to exit, creating economic chaos and a further weakening of EURUSD.
Even though the Italian economy has been running low on steam for years, it is still the third largest in the eurozone. The impact of Italy’s departure from the bloc would be felt across Europe and euro sentiment would likely reach rock bottom by the summer.
The euro dollar forecast spells trouble
In the event of an Italian exit from the EU, EURUSD would hit a long-term sell-off trend. The uncertainty would prompt analysts to research how leaving the eurozone would affect the currency pair. By Q3, the euro would, potentially, fall by as much as 30% against the dollar. This forecast is based on Italy's economic contributions to the EU compared with the UK’s. Negotiations for an exit deal would likely extend into Q4 of 2019. Euro buyers could be in for a rough year.
2019 euro dollar forecast and trading strategy
Italy leaving the EU in 2019 is a pretty far-fetched prediction. But, let me remind you that Brexit seemed pretty improbable until it happened ——when the UK dropped the Brexit bomb, it would be an understatement to say that jaws dropped.
So, let’s look at how to trade EURUSD if Italy were to leave the EU. It’s quite simple, and if Brexit is anything to go by, then you can expect EURUSD to fall fast. “SELL” will probably be the order of the day and perhaps the order of the whole year.
Since the Brexit vote, political uncertainty has been growing steadily in the EU as the Deal/ No Deal chaos unfolds. Nobody knows if or when another member of the bloc might follow in the UK’s footsteps. Every EU exit is a worst case scenario that’s fast becoming a looming threat to the euro.
Be ready to trade the volatility Brexit and a potential Italian exit could trigger.
Your 4-step guide to opening a trading account
Step 1: Getting registered
It's very easy to open an account with Exness. Click here to open the sign-up page in a new tab. If you want to get everything done in the next 10 minutes, be sure to have a credit card, ID, and, proof of address by your side. You can choose to open a demo account without these things. Either way, everything you need to know is here in this two-minute video. Pause the video as you go through the first three steps.
Tip: Account type depends on the amount you wish to deposit. Leverage is effectively an interest-free loan that the broker offers. It allows you to make a large investment from a small deposit. If you are looking for high profit with high risk, a higher leverage might be right for you. If you prefer slow-burning safety with lower results, then keep your leverage low. You can never lose more than you have, but higher leverage means faster results... both good and bad.
Step 2: Prove who you are
Exness takes security very seriously, and they check every client signing up. Just like opening a bank account, you'll need to prove who you are before getting access to the global markets. Watch this one-minute video to see how.
Tip: While you're waiting for your real account to be approved, open up a demo account and start getting to know the trading platform.
Step 3: how to get access to the market
Trades are made using the award-winning MT4 trading platform. Inside the box of the demo or real account you'll see a gear cog. Click the gear cog to make a deposit. Use the passwords provided in the email. Click the gear cog again and select SIGN IN TO MT4 WEBTERMINAL then follow this one-minute video. You're about to make your first virtual trade on the real markets.
Step 4: making a trade
Once you've made your own euro dollar forecast, you can set up your trade. As a default, the top currency pair on the list will have an open chart. Right click on the chart and select the “close” option.
As a professional trader, selecting the right pair requires some research. For a first-time test, any pair will be sufficient. Drag a pair from the list of currencies on the left side of the trading terminal. The old saying goes, “what goes up, must come down.” Obviously, this principle goes the other way too. Your mission is to find a moment when the price direction is going to swing or reverse. If you feel the price is about to go up (bullish), then BUY, if it looks like it’s been trading high and the price has started a downward (bearish) trend, then SELL.
Open a trade after making your euro dollar forecast
There are many ways to open your trade. You can select from the buy and sell options on the top left of the chart. Preferably, double-click the currency pair on the list. Right click on the chart when you’re ready to make your first trade. Time to set the volume depending on how confident you are in the direction of your euro dollar forecast. This is the perfect time to set your stop loss and take profit. Click the arrow to the right of the stop loss and take profit prices.
Note how the blue and dark red lines in the popup graph sit above and below the buy(ask) and sell(bid) price. In the example, we traded long (buy) and got a message confirming the order was successful. If you get an error, your volume was too high for your balance, or your stop loss/take profit was too close to the spread. Remember, every order starts as a negative because of the spread. Be patient. Your take profit will activate when the time is right, and your stop loss is protecting you. To close an order, you have three options. Click the X on the right or right-click the order. If you double click the order, you can close or modify the order.
You made your euro dollar forecast and you now know how to make a trade. Forex trading can be an exciting way to spend your free time, and you'll actually learn some real-world skills that will serve you well throughout your lifetime. Be patient, learn, and who knows, you might one day be one of the lucky few full-time traders. How will you spend your day?
Didn't start yet?
This article is a marketing communication and does not constitute investment advice or research. Its content represents the general views of our experts and does not consider individual readers’ personal circumstances, investment experience, or current financial situation.
This article is not prepared in accordance with legal requirements promoting independent investment research, and Exness is not subject to any prohibition on dealing before the release of the article. Readers should consider the possibility that they may incur losses. Therefore, Exness is not liable for any losses incurred due to the use of its articles. Please note that past performance of an asset is not a reliable indicator of future results.