EUR/USD trading stategy

In the midnight of January 1st 1999 Germany, Italy, France, Spain, Portugal and most European nations adopted a single European currency, the Euro. It is a move to unify the European union member nations in terms of fiscal and monetary policy. Since then, the Euro became one of the most liquid currencies along side the US Dollar in the Forex market. The Eurozone in comparison to the United States has roughly the same in size in both its Gross domestic product and population. EUR/USD pair is the most liquid currency in the currency market followed by the USD/JPY. The pair has a low pip spread in response to its great liquidity. The currency pair also accounts for more than 28% of global trading volume. In 2007, the market value of all the European zone stock market surpassed the value of US equities. EUR/USD is the primary foil to when it comes to speculating in the overall trend of the US Dollar. When economic news hits concerning the health of the US economy, this pair is the most sensitive followed by USD/JPY. The EUR/USD currency pair also reacts to economic news in the Euro zone, but the overall push still comes in from US economic data. The bias on the economic data may be due to the fact that the entire Euro zone opens its markets 4 hours ahead of the US market opening. When Eurozone economic data is released, big traders usually hold off their trading decision and waits until US data comes in 4-8 hours later. Most Euro zone economic data are slightly ignored when making a trading decision in the EUR/USD pair.

Dutch retail sales and Italian industrial production makes up a small percentage of the overall economic activity in the Euro zone. The pair would be greatly affected by the two largest Euro states, Germany and France. Major events to look out for on the Euro zone side are the usual European Central Bank (ECB) interest rate decision, EU consumer price index (CPI) and Producer price index (PPI), Industrial production, retail sales and unemployment rate.


When prices jump widely, EUR/USD pair tends to settle on a certain level until the opposite interest begins moving the pair the opposite direction. Because of its liquidity, It is difficult to predict whether a support level for the currency pair would be breached. Professional traders would look into the GBP/USD or the USD/CHF to gauge their decision on the EUR/USD. The Pound and Swiss Franc against the US Dollar Tend to be good indicators when it comes to following EUR/USD trend. If GBP/USD and USD/CHF tends to trade at the technical level with very little opposition, it mirrors the behavior of the EUR/USD pair. Take advantage of backing in filling on the EUR/USD. When you decide to enter a position, you can afford to wait below or above your desired entry point since it tends to do a random walk up and down on a narrow range.

comments powered by Disqus

Previous | Next

Stocks | Forex | Options | Economics | Bonds | History | Language learning | Technology | Technical Analysis | Fundamental Analysis
Copyright © 2014 econtrader | Risk disclosure | Terms of Use