EUR / USD currency pair
Due to the fact that politics influences the trends in the global economy, that is, if there are any elections, strikes, or sudden events, both good and bad, trading in this market can lead to significant trading profits. If you are ready to trade the Euro, which is a convenient currency as it covers politics and economic activity in a volatile but predictable part of the world: Europe, then feel free to start trading. Currently, EUR/USD is the most actively traded currency pair on the world currency markets.
Inflation is not known to be good for any economy and most central banks fight inflation by increasing or decreasing the interest rates on the market. In the United States, where the currency market is free, the vigilant Federal Reserve makes more frequent adjustments to interest rates. Well France, Italy and Germany, the largest members of the European Union (EU), tend to operate with high budget deficits and keep their interest rates in a more stable environment.
The Fed’s general trend for the dollar, has been moving in one general direction for quite some time. Here are some general euro trends to keep an eye on aside from technical analysis:
1) As mentioned earlier, most of the world’s central banks, are putting the fight against inflation on a strict agenda. Given the history of hyperinflation in Germany in the first half of the 20th century, and the aftermath of that period, namely Hitler’s rise to power, the European Central Bank (ECB) is almost fanatical about inflation. This means that the European Central Bank has in most cases raised interest rates more easily than lowered them. However, now, with a severe global recession in mind, the ECB has cut interest rates, dramatically stimulating economic activity across the Eurozone.
2) European Central Bank action becomes important when all other factors are equal, i.e., policy is equally stable, or unstable in the US and Europe, and the two economies are growing. For example, if the US economy slows down, money starts to slowly move away from the dollar. In the past this meant that money would move towards the Japanese yen, however, due to the fact that the market knows that the Japanese central bank will sell the yen, the default currency, when the dollar weakens, money now often moves towards the euro.
3) The EUR/USD currency pair is heavily influenced by political developments in the Eurozone. The flipside of this, is that the market becomes nervous and often sells off the Euro during political problems in the region, especially when the European economy slows down.
These trends are minor in nature and tend to dry up as the political situation calms down. Nevertheless, traders want to capitalise on these minor trends, as they could very well become very profitable. Keep a close eye on major currencies and cross rates.
What is important to know is in which direction the market is moving. It is always better to choose only two or three currency pairs, and become an expert in them. Use technical analysis to make the right decision, a combination of fundamental analysis and technical analysis can give you an advantage. Sometimes there is a fundamental shift in the direction of a currency pair. Until you follow a currency pair such as EUR/USD on a daily basis, you will not be able to understand what is happening.
