EUR/USD trading allows you to speculate on the exchange rate direction of the two currencies. The two currencies represent two economic powerhouses, meaning trading EUR/USD is extremely popular with foreign exchange (forex) traders. The currency pair is one of the most traded fiat currencies in the world.
Typically, the EUR/USD experiences higher volumes when major news events and economic data drive fluctuations in the price, allowing speculation on the pair. The depth and liquidity of the EUR/USD market allows for all classes of traders to be active, including central banks, investment banks, commercial banks, fund managers, corporates, retail traders and many more. Some, like the corporates, may be hedging their exposure, while others are investors and some act in a speculative capacity. For retail traders in particular – individuals who trade FX part-time or full-time through a broker – it is particularly attractive because spreads can be tight, meaning the cost of buying and selling can be held low. The spot price in FX trading refers to the current exchange rate for a currency pair. Spot FX contracts are traded over-the-counter (OTC) between banks and other financial institutions.
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Buyers who keep their future position open beyond the due date may be bound to a physical delivery of an asset if it exists in physical form. Contracts for difference (CFD) are financial derivatives that allow traders to speculate on the price direction of an asset – for example, EUR/USD – without owning the underlying security. Individuals can trade on forex platforms that give retail traders access to the secondary OTC market. There are a wide variety of instruments you can use for EUR/USD trading.
Let’s now cast our eyes over some of the things that have an impact on the value of the dollar and the euro and, by extension, the value of the EUR/USD trading pair. Over the next few years the EUR/USD trend was characterised by large price swings as various economic and political events affected it, with the Greek Debt Crisis ndax review a blow to the European currency. Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.
The period between the close of US exchanges and before Asian markets open is typically the most reserved period for trade during a standard day. In contrast, the crossover of European late afternoon and morning New York trading hours is normally the most active. Once you know that information, multiply the amount you have in USD by the current exchange rate. The resulting number will show you the amount in dollars you have to spend on your trip. If you’re planning a trip to the United States in the near future, you may want to exchange some of your money for U.S dollars, the country’s official currency. You can send a variety of international currencies to multiple countries reliably, quickly, and safely, and at a rate cheaper than most banks.
These include using a spot rate via a forex platform, trading through a spread betting provider, or using a broker trading contracts for difference (CFDs). So, for example, a quote of 0.80 EUR/USD means that 1 EUR would cost you $0.80. If the pair appreciates to 1.00, the euro has increased in value because it now costs $1 to buy a euro. On the other hand, if the pair is quoted .75, the dollar is seeing strength because it now costs just $0.75 to buy a euro. Hawkish comments from Federal Reserve (Fed) policymakers following the inflation data helped the US Dollar (USD) outperform its rivals and caused EUR/USD to turn south. The other option is to do the calculation manually using a simple mathematical formula.
Day trading may be an appropriate EUR/USD trading strategy when a trader chooses to get exposure via fast-paced derivative products. Option contracts too are derivatives that can be used for trading EUR/USD. An option gives a trader a right – but not an obligation – to buy an asset at a set price yet at a later date. There are call and put options, and they would always have a due date. Futures have due dates, allowing going long and short and in some cases allowing the use of leverage, which can magnify both profits and losses.
- On the other hand, if the pair is quoted .75, the dollar is seeing strength because it now costs just $0.75 to buy a euro.
- If you’re planning a trip to the United States in the near future, you may want to exchange some of your money for U.S dollars, the country’s official currency.
- Individuals can trade on forex platforms that give retail traders access to the secondary OTC market.
- Instead retail investors engage in trading with a Registered Foreign Exchange Dealer, which acts as a counterparty to all of its customers’ trades.
Position traders ignore short-term price volatility and aim to capitalise on longer-term market trends. News trading involves keeping a close eye on the news – such as economic readings and central banks announcement – that drive EUR/USD exchange rate. EUR/USD trading is buying and selling the euro (EUR) against the US dollar etoro is it safe (USD) to speculate on the exchange rate fluctuations. Traders can use a variety of financial derivatives to trade the pair, or buy and sell physical currency. Remember, that there are a number of factors that can drive the EUR/USD exchange rate, including central banks’ announcements, economic readings and geopolitical news.
FX Market Turnover (April 2019 in pink vs April 2016 in blue)
A EUR/USD quote could easily be shown as USD/EUR by making a simple calculation, but there are no strict rules that determine whether a currency pair is shown directly or indirectly. Once every three years the Bank for International Settlements (BIS), often called the central bankers’ bank, conducts an in-depth survey of the global foreign exchange (FX) and over-the-counter (OTC) derivatives markets. The most recent look was in April 2019 and it emphasized again just how important the US Dollar and the Euro are in the currency markets. Day traders can look to news events to help decide when to buy and sell.
This is only an example and past performance is not indicative of future returns. These percentages show how much the exchange rate has fluctuated over the last 30 and 90-day periods. These are the lowest points the exchange rate has been at in the last 30 and 90-day periods. These are the highest points the exchange rate has been at in the last 30 and 90-day periods. Similarly to CFDs, spread-betting entails trading derivatives, rather than buying and selling the underlying asset. It may seem obvious but, as with any currency pair, it is crucial to pay attention to both sides of the equation.
News trading strategy
The EUR/USD pair has become the most widely-traded pair in the world. The pair represents a combination of two of the biggest economies in the world. It is affected by factors that influence the value of the euro and the U.S. dollar in relation to each other and to other currencies. The Xe Rate Alerts will let you know when the rate you need is triggered on your selected currency pairs.
It is also legal tender in some of Europe’s microstates, such as Andorra, Monaco, San Marino and Vatican City. The US dollar is the national currency of the US, but also serves as the main unit of value in 10 other territories, including Ecuador, Panama and East Timor. Gold price (XAU/USD) ticks lower following an intraday uptick back closer to a one-month top touched the previous day and slides closer to the $2,042-2,040 resistance break point during the early European session on Friday. The Japanese Yen drifts lower on Friday and moves away from over a two-week high. The BoJ policy uncertainty and the risk-on environment undermine the safe-haven JPY.
The value of shares and ETFs bought through a share dealing account can fall as well as rise, which could mean getting back less than you originally put in. We encourage you to always conduct your own research before trading, make use of risk-management tools and keep your emotions in check. This followed the fallout from the 2008 financial crisis, while the US subprime mortgage crisis increased its strength, the crisis caused a recession in Europe. It calculated that the US Dollar was on one side of 88% of all trades, with the Euro in second place at 32%. Trading in EUR/USD accounted for almost a quarter of all FX trades, according to the BIS survey.
The euro currency originated on 1992 as a result of the Maastricht Treaty. Consequently, the euro integrates and represents a large number of European economies. This serves to stabilize currency coinmama exchange review exchange rates and volatility for all members of the European Union. It also makes the euro one of the most heavily traded currencies in the forex market, second only to the U.S. dollar.
Hawkish Fed expectations underpin the USD and remain supportive of the momentum. In case the Core HICP for the Eurozone rises at a stronger pace than forecast, the initial reaction could provide a boost to the Euro. On the other hand, a reading at or below the market consensus could hurt the currency and weigh on EUR/USD. Inflation in the US, as measured by the change in Personal Consumption Expenditures (PCE) Price Index, declined to 2.4% on a yearly basis in January, the US Bureau of Economic Analysis reported on Thursday. The Core PCE Price Index, which excludes volatile food and energy prices, rose 2.8% on a yearly basis, matching analysts’ estimate.
Future contracts are derivative products that give traders to carry out a transaction at some point in the future at a price agreed today. If the price goes up, then the trader gets profit, yet if it falls, they lose money. Traders can use future contracts to speculate on EUR/USD exchange rate.. The euro currency originated because of the Maastricht Treaty in 1992 and was introduced as an accounting currency in 1999.