How to Trade EUR-USD
The currency pair is classified as major a+since it is the most traded currency pair in the world and they are very close in value. The difference in value, i.e. the strength of the currencies depend on the economic status of the states they represent, coming down to the Eurozone and the US economy.
The EURUSD is the most traded and most liquid pair since this currency pair is being sold and bought numerous times on a daily basis. It goes over the trading table as the best know currency pair. The special feature which draws so many traders to the EURUSD is the small spread. Namely, these currencies are close in value and they do not account for major losses when it comes to individual trades. Since binary options are close to Forex trading, this pair is one of the highlights in the options market as well.
Before you enter a binary options trade on this currency pair you might want to know the following:
- The greatest market activity of this pair takes place during North American and European sessions and you should trade only during USA and European sessions to avoid a standstill of the currencies;
- The Asian market activity time is also not to be neglected for trading ranges with a special target on One Touch options given the consolidation of EURUSD in Asia;
- EURUSD trading is highly popular since it involves the two biggest global economies the USA and Eurozone which reflect on minor economies as well.
Follow The News of the European Market
To stay in the loop, it is very important to follow the economic news related to this currency pair since it contains a lot of useful information regarding price movements of the two currencies. As a committed trader, you should take a look at the European Consumer Price Index (CPI) since it reveals the inflation status which is one of the key factors for the European Central Bank when drafting its monetary policy.
The European Purchasing Manager Index (PMI) represents also an important source of economic information given that it examines individual sectors and if they are growing or declining which is yet another hint as the European Central Bank uses the data and classifies them as dovish or hawkish/bullish or bearish.
Traders also look at the EU GDP (Gross Domestic Product) and the course of the unemployment rate in the EU when they trade the EURUSD currency pair. Follow the press conferences of the sessions of the ECB (European Central Bank) whereby the ECB President answers interesting questions on the market, an event which causes fluctuations in the market since the EURUSD trade frequency is particularly volatile during these events.
All of the economic news and releases give useful information to traders and can help them acquire more knowledge related to the economic movement, but they do not represent an instant success ticket, but rather give hints to traders of what is going happen at the next meeting and what decisions will be taken. A trader’s job is to interpret the information and link them to the EURUSD price movements, e.g. if inflation is greater than predicted by the ECB, you can prepare yourself for rates being cut.
Follow The News on the US Market
Since the USA is the biggest economy, closely followed by the Eurozone, economic news is being released regularly on a monthly basis and the news which one should take to heart as a trader are discussed below.
The Federal Reserve or the US Central Bank has a dual role and its decisions can be guessed from employment data and inflation or CPI. As a trader, make sure to take into account releases relating to these two factors, but some other sources will also be to your benefit. For example, the Institute for Supply Management (ISM), Retail Sales, Manufacturing and Non-Manufacturing, GDP, Private payrolls (ADP)Producer Price Index (PPI), etc.
Studying the different information from all of the listed sources can help you gain a better understanding of the market.
The Goal of Following Economic News
Well, of you follow the big economic releases, you will notice that the markets show the most intense volatility during those periods. Technical factors are the trigger for market movements but the reason for movement is news release which has been already proven in the past.
In order to give you a full picture let’s imagine that news on the unemployment rate in the Eurozone is being announced during the London market session and the rate is higher than initially predicted. Such an information will automatically lower the value of the EURUSD pair since everyone will be looking to get rid of the depreciating Euro since they know that the ECB will be looking to modify the monetary policy in order to make up for the bigger unemployment rate. But, if during US news release it turns out that the US GDP is not indicating growth but rather a recession, it will completely out-balance or undo the Eurozone unemployment crisis and the EURUSD will automatically start to climb in value in the market.
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