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. To summarize, the breadth and depth of the EUR/USD market makes it unique and perhaps an appealing terrain for retail traders just starting out – as well as those with years of experience. It may not be as volatile as many other markets but volume will be substantial enough for traders to navigate in and out of trades. 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.
As well as fundamental and technical analysis, psychological techniques deserve consideration in any strategy. From gauging the mood of the general market in a spectrum between panic and mania to calculating personal risk management, this can often present the most crucial insight for analysis and strategy development. Oil traders are surprised to see a very light auction ahead for the US Strategic Oil Reserve. The US Dollar Index sinks for a fifth straight day ahead of the ECB decision. The US Commodity Futures Trading Commission’s weekly Commitments of Traders (COT) reports on the major futures market participants offer insight for those with frequently longer duration intention. It may seem obvious but, as with any currency pair, it is crucial to pay attention to both sides of the equation.
It is important to note that the BIS is a good resource to gauge the size of the $6.6 trillion global interbank market, but that non-institutional, or retail and/or individual investors, do not engage in trading directly in the interbank market. Instead retail investors engage in trading with a Registered Foreign Exchange Dealer, which acts as a counterparty to all of its customers’ trades. The euro currency originated on 1992 as a result of the Maastricht Treaty. On Jan. 1, 2002, the euro began circulating in member countries of the EU, and over the course of several years, it became the accepted currency of the European Union and ultimately replaced the currencies of many of its members. Consequently, the euro integrates and represents a large number of European economies.
The European Central Bank (ECB)
This serves to stabilize currency 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. 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.
- Back to the ECB event, the bank predicts a 1.5% growth in the economy in 2025 and 1.6% in 2026, driven by consumption and investment.
- Thus, the source of the strengthening and/or weakening is not reflected in the rate.
- The Currency Pair EUR/USD is the shortened term for the euro against U.S. dollar pair, or cross for the currencies of the European Union (EU) and the United States (USD).
- Our currency rankings show that the most popular Euro exchange rate is the EUR to USD rate.
- Trading the EUR/USD currency pair is also known as trading the “euro.” The value of the EUR/USD pair is quoted as 1 euro per x U.S. dollars.
The Xe Rate Alerts will let you know when the rate you need is triggered on your selected currency pairs. Create a chart for any currency pair in the world to see their currency history. These currency charts use live mid-market rates, are easy to use, and are very reliable. 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.
Oil on the backfoot with US data cooling further
In the case of EUR/USD, it is important to monitor what is happening in both the US and the Eurozone – those EU countries that have adopted the Euro as their currency. Check live rates, send money securely, set rate alerts, receive notifications and more. This is only an example and past performance is not indicative of future returns. 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. So far, and according to the FedWatch Tool by CME Group, expectations of a rate cut in June increased to approximately 60%.
News of the government debt crisis and immigrant influx in Italy and Greece resulted in a euro selloff, prompting the pair’s exchange rate to plunge. Because turnover is so high in EUR/USD, technical strategies tend to work well. However, it is important to understand that the base currency of the pair is fixed and always represents one unit. Thus, the source of the strengthening and/or weakening is not reflected in the rate. The EUR/USD rate can increase because the euro is getting stronger or the U.S. dollar is getting weaker. Either condition results in an upward movement in the rate (price) and a corresponding upward movement in a price chart.
Euro and US Dollar events
Trading the EUR/USD currency pair is also known as trading the “euro.” The value of the EUR/USD pair is quoted as 1 euro per x U.S. dollars. For example, if the pair is trading at 1.50, https://www.dowjonesanalysis.com/ it means it takes 1.5 U.S. dollars to buy 1 euro. At her press conference, President Lagarde argued that there is a slowdown in demand for labour and elevated domestic price pressures.
Therefore, the directional indication of a chart corresponds to the base currency. Using the earlier example, when a trader takes a long position in the EUR/USD currency at 1.50, as the rate increases to 1.70, the euro increases in strength (as indicated in the price chart) and the U.S. dollar weakens. Now it takes $1.70 (more dollars) to purchase the same euro, making the dollar weaker and/or the euro stronger. According to the Bank for International Settlement (BIS), which compiles statistics in cooperation with world central banks to inform analysis of global liquidity, among other things, the US Dollar and the Euro are the two most traded currencies in the world.
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 https://www.topforexnews.org/ held low. For example, when the Fed intervenes in open market activities to make the U.S. dollar stronger, the value of the EUR/USD cross could pullback or decline due to a strengthening of the U.S. dollar compared to the euro. Along the same lines, bad news from the EU economy has an adverse effect on prices for the EUR/USD pair.
Regarding Powell’s remarks, in his prepared statement, he hinted at the likelihood of interest rate reductions within the year. However, such measures would only be enacted once the Fed gains greater confidence in the trajectory of inflation returning to its targeted annual rate of 2%. As of March 26, 2018, 19 of the 28 member countries of the European Union use the euro. According to the ECB, as of January 1, 2017, more than €1 trillion are in circulation in the world. For this reason, the interest rate differential between the European Central Bank (ECB) and the Federal Reserve (Fed) affects the value of these currencies when compared to each other.
The USD/JPY (or US Dollar Japanese Yen) currency pair is one of the ‘Majors’, the most important pairs in the world. Japanese Yen has a low interest rate, normally used in carry trades, that’s why is one of the most trades currencies worldwide. In the USD/JPY the US Dollar is the base currency and the Japanese Yen is the counter currency. The pair represents American (from United States of America) and Japanese economies. The Currency Pair EUR/USD is the shortened term for the euro against U.S. dollar pair, or cross for the currencies of the European Union (EU) and the United States (USD). The currency pair indicates how many U.S. dollars (the quote currency) are needed to purchase one euro (the base currency).
EUR/GBP edges lower on contrasting growth prospects
It is not a solicitation or a recommendation to trade derivatives contracts or securities and should not be construed or interpreted as financial advice. Any examples given are provided for illustrative purposes only and no representation is being made that any person will, or is likely to, achieve profits or losses similar to those examples. DailyFX Limited is not responsible for any trading decisions taken by persons not intended to view this material. Unlike a price chart for a stock in which the indicated price directly represents a price for the stock, the price listed on a price chart for a currency pair represents the exchange rate of the two currencies.
Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. We https://www.forexbox.info/ recommend that you seek independent advice and ensure you fully understand the risks involved before trading.Information presented by DailyFX Limited should be construed as market commentary, merely observing economical, political and market conditions.
Back to the ECB event, the bank predicts a 1.5% growth in the economy in 2025 and 1.6% in 2026, driven by consumption and investment. It also plans to reduce the PEPP portfolio by €7.5B per month in the second half of the year. Furthermore, inflation projections have been revised down to 2.6% for 2024, 2.1% for 2025, and 2.0% for 2026 and the growth projection for 2024 has been revised to 0.6%, with economic activity expected to remain subdued. Still around money markets, in Germany, 10-year bund yields dropped to multi-week lows around 2.25% after the ECB left its interest rates unchanged, as broadly anticipated. Our currency rankings show that the most popular US Dollar exchange rate is the USD to USD rate. Our currency rankings show that the most popular Euro exchange rate is the EUR to USD rate.