EUR/USD trading signals can be used for new and inexperienced traders, so they can take advantage of good buy or selling opportunities. One of the most common buy options in the market is EUR/USD.
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EUR/USD Signals & Technical Analysis
ABOUT THE EUR/USD (EURO/US DOLLAR)
The EUR/USD is the most liquid and frequently traded currency pair in forex, nicknamed Fiber or the Euro Dollar. Representing two of the largest economies in the world, the value of the EUR/USD depends significantly on the relative economic strength of two trading blocs, the US and the EU.
It's therefore not much of a surprise that the EUR/USD is the most actively traded currency pair in the world. But while strong volatility and volume bring day traders, banks, and institutional investors from all over the world to EUR/USD, generating substantial profits is no straightforward feat.
The currency pair indicates how many US dollars (the quote currency) are needed to purchase one Euro (the base currency). For example, if the pair is trading at 1.10, it means that it takes 1.10 US dollars to buy 1 Euro.
What Determines the EUR/USD Exchange Rate?
Several factors can impact the EUR/USD valuation, particularly ECB & US FED Monetary Policies. The European Central Bank and the Federal Reserve control the supply of money in the Euro and Dollar markets to keep the economy ticking over.
A dovish policy, which is also known as expansionary monetary policy, weakens the currency. In contrast, a hawkish monetary policy (contractionary policy) strengthens a currency. For example, if the FED decides to intervene in the market and boost the USD, the price of EUR/USD will decrease as the dollar gets stronger.
Any movements in the US and Eurozone economic events determine the pair’s exchange rates. Top-of-the-line economic events include GDP, Employment Change, Industrial Production, and Consumer Price Index.
Better than expected data increases the demand for the related currency and impacts the value of either the Euro or the US Dollar, causing fluctuations in the EUR/USD exchange rate. For example, if positive GDP data emerges from the US while Europe lags behind, EUR/USD will likely fall.
- Gross Domestic Product – the Gross Domestic Product (GDP) is the central measure of economic growth in a given region.
- Employment Change – The Euro is also sensitive to changes in employment, particularly in the Eurozone's largest economies like Germany and France.
- Consumer Price Index – Since one of the goals of the ECB is to maintain price stability, they keep an eye on key inflation indicators such as the CPI. If the annual CPI deviates from the central bank target, the ECB may use its monetary policy tools, such as increasing interest rates to quell spending, to keep inflation in check.
- German Industrial Production – This measures a change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities. As the biggest economy in the Eurozone, Germany’s economic data plays a significant role in the price of the Euro Dollar.
- Political Events – Another critical factor is the political aspect. Instability, as seen in the Brexit referendum, can upset the market and completely change the direction of the currencies. As with all currencies, it’s a challenge to determine where the market is going, so keeping up to date with the latest political and economic news in the US and Eurozone is vital to maintaining an edge in the forex market.
Who trades EUR/USD?
EUR/USD is an attractive pair to trade. As the most liquid currency pair in the forex universe, spreads are often razor-thin and perfect for short-term scalp trades. Its depth, liquidity, and overall popularity make it a favorite of central banks, commercial banks, institutional traders, and retail traders alike. While large banks often use the pair as a hedge, retail traders favor EUR/USD as both a bellwether for the dollar and for its low-cost to trade and hold.
The EUR/USD is traded in amounts denominated in the US Dollar.
Standard lot Size: 100,000
Mini lot size: 10,000
One pip in decimals 0.0001
Pip Value: $10
Pip Value Dollar = Pip in decimal places * Trade Size