Looking To Diversify Amid All The Ongoing Volatility? Check Out The Forex Market

Silicon Valley Bank (SVB) continues to send shockwaves across financial markets over a week after its collapse. 

Two days after SVB’s collapse on March 10th, Signature Bank, a financial institution with around $110.36 billion in assets and $88.59 billion in deposits, was forced to close down its doors by regulators. Initial concerns centered on the banks’ depositors who, alongside SVB’s $175.4 billion in deposits, held more than $263 billion across the two banks. 

A joint statement from The Federal Reserve, the Federal Deposit Insurance Company (FIDC) and the Department of Treasury issued on the same day of Signature Bank’s collapse helped alleviate some fears for depositors. “Depositors will have access to all their money starting Monday, March 13,” the statement said. “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.” 

On March 15th, fears of a broader banking collapse crept up once more following Credit Suisse Group AG’s CS 25% drop from the previous day’s close. The fact that the price drop appears to be rooted in an investment decision from Saudi Arabia rather than the bank collapse in the U.S. has done little to ease fears about the state of the global banking system. 

Using SVB’s Collapse To Trade EUR/USD And USD/CHF

Traders may find some solace from the global banking system’s instability in the volatility it imposes on forex pairs. A report by FOREX.com’s Matt Simpson shows the potential trading opportunities in EUR/USD, a forex pair heavily impacted by both SVB and Credit Suisse’s woes. 

Simpson writes: “EUR/USD has drifted into a key resistance zone around 1.0620 which includes the daily and weekly pivot points and 38.2% Fibonacci level, making it a pivotal level for the day. Also note how the 200-day EMA sits around a 61.8% level, and the 200-week EMA sits lower around the weekly S1. And today’s direction is likely to be down to how hawkish or dovish the meeting is deemed to be.” 

A glance at the 4-hour chart for the U.S. Dollar-Swiss Franc (USD/CHF) pair as on March 17 shows a similarly attractive trading environment over the preceding couple of days. Volatility has enveloped the pair as the Swiss National Bank issued a $54 billion emergency payment to Credit Suisse. The pair presented rewarding opportunities for both trend-based and reversal-based traders who were aiming to capitalize on the pair’s price action. 

As the banking system dilemma unfolds, traders will likely experience more of these opportunities in the weeks to come. Visit FOREX.com to learn more about how you can capitalize.

Featured photo by Adam Nir on Unsplash

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