How can You trade the EUR/USD?
There are a few ways of taking advantage of movements in the exchange range between the euro versus the US dollar, and below are three methods that could work for you.
If you have strong convictions about the prospects of the economic state of the Eurozone or the United States of America, then buying or selling this currency pair is a good way to put that hunch to the test.
Opening a position on this pair could also benefit you if you are looking to hedge an investment. If you are heavily invested in European stocks and you would like to trade on the health of the US economy, opening a trade on the dollar could allow you to do that.
Day traders who are quick on their feet could enjoy trading the short term movements made by this currency pair.
What factors influence the EUR/USD?
In most cases, the performance of the EUR/USD is a reflection of the economic performance of the Eurozone and the United States, which reflects the interest rate changes per the Fed Reserve and the ECB’s decision.
The exchange rate could also be impacted by any major events, whether they are politics of finance oriented. If there should be a financial crisis in the Eurozone, the ECB will tailor the interest rates to avoid additional damage. The bank’s decision could then cause the euro’s market value to rise or drop accordingly.
What to consider when trading the EUR/USD?
If you choose to trade the EUR/USD, then you should take the following into consideration: this is a very liquid market and the interest rates are kept low in both regions. This translates to both ample opportunity and relative safety, as neither currency is likely to crash on an inflationary gale.
Moreover, this is a trading environment that is rich in information, and you will often find events to trade on. In other words, the better the data, the better you could build your strategy towards your next trade on this currency pair.
Did you know?
EUR/USD is the most widely traded currency pair on the forex market.
This pair gauges the strength of two of the world’s largest economies, and its market value is influenced by factors that affect the euro and the dollar in relation to each other and to other currencies.