Backed by two of the world’s largest economies, the EUR/USD is one of the majors in Forex and the most liquid currency pair in the market. With only two months left until the 2019 trading season ends, the pairing enjoys upside momentum on the four-hour chart and continues to offer traders competitive spreads, making it a great investment opportunity. Read more about it below and find out how you can trade it successfully!
What you need to know about the EUR/USD currency pair
The euro to U.S. dollar currency pair tells the trader how many U.S. dollars (the quote currency) are needed to buy one euro (the base currency). Also known as the “fiber” or simply the Euro, it represents two of the largest and most influential economies in the world: the United States and the European Union. The EUR/USD currency pair has only been around since 1999 when the euro was introduced to the global financial markets, but nowadays it is the most traded currency pair in the foreign exchange market.
The interest rate differential between the two currencies tends to influence the EUR/USD value. The Federal Reserve (FED) determines the interest rate of the U.S. dollar, while the European Central Bank (ECB) manages and regulates the monetary policy of the euro.
What makes the EUR/USD so attractive?
There are many reasons why this forex pair is so popular. First of all, the trading of the EUR /USD currency pair in such high volumes results in reduced bid & ask price differences, which ensures that it trades at tight spreads. On the other hand, the EUR/USD is exposed to a vast amount of news on a daily basis, which can trigger substantial price movement.
There is also a great amount of financial data available on the pair’s exchange rate. All this, along with the low spreads; high volatility and liquidity make it an attractive trading opportunity for all types of investors, both beginners and experienced.
How to trade the EUR/USD successfully – Effective strategies and tips
Trading the EUR/USD currency pair successfully will be possible once you understand its characteristics and the factors that influence it. There are various strategies you could try, but the important thing is to find the ones that correspond to your personal trading profile and risk tolerance. Here are a few tips & strategies that will help you:
Trade the EUR/USD currency pair during the correct sessions
If you are a day trader, higher volatility may allow for your trading strategy to reach the desired results more regularly. This means you should trade the pair when it sees the most action, which is when the American and European sessions are open. The New York session is open 12:00 GMT – 20:00 GMT and the London session is open 07:00 GMT – 16:00 GMT. Also, there are certain times when the volatility will increase, typically immediately after economic data releases or the monetary policy statements after central bank meetings.
Always keep an eye on the fundamental factors that influence the EUR/USD currency pair
The fundamentals driving the value of one currency against the other are defined by the strength of the two currencies’ economies. You can analyze them by comparing the Gross Domestic Products (GDP) rates, the Consumer Price Index (CPI) rates, unemployment rates, and other fundamental metrics. Use all the gathered information to your advantage and try applying forex trading strategies based on fundamentals.
Learn how to read the price action
In the long-term, this will help you become a disciplined trader and get a better understanding of the asset you’re trading. Simply put, price action trading means making your trading decisions based on the price movement of the asset you’re trading, without the use of any indicators. It is a method of technical analysis and there are numerous price action strategies available, such as the support level breakout one or the Forex gap strategy.
Write down a trading plan
As mentioned above, we’re talking about a highly liquid and volatile currency pair. Opening a trade without any predefined guidelines is a guaranteed failure. Assess your intentions: What is your profit target? When do you plan on opening & closing the trade and why? What is the risk level you’re willing to take? Make sure to approach a trading strategy that serves your purposes and helps you reach the desired results. Keep a trading journal to monitor your activity.
Choose a regulated forex broker
The platform where you perform your trading activities plays an extremely important role! Make sure you choose the best forex broker you can find, one that is able to fulfill your needs – from the account type and tools to the trading platform and assistance. TradeFW.com is a regulated top trading company, acclaimed for its diverse and professional forex services. It provides the ideal environment to trade the EUR/USD currency pair!
To sum up
The EUR/USD currency pair is the first choice of millions of traders due to its liquidity, volatility and low spreads. Whether you’re a day trader or taking longer-term positions, it’s important to keep an eye on all the major data releases, as well as central bank statements. Trading this pair during the right sessions, with the right strategy and broker represents a great starting point that will most likely help you profit sooner than you think.