14 Dec TRADING EDUCATION: EUR USD
The EUR USD is known colloquially within forex trading as the EuroDollar or rather less frequently as ‘The Fiber’.
By far the most traded pair within the Forex market, the EUR USD represents two of the world’s largest economies, the Euro Zone (EUR) and the United States (USD). As a result, it can see significant volume levels whilst maintaining a low broker spread making it one of the most popular currency pairs for new traders as they learn to trade forex.
In the case of the euro dollar forecast and the market itself, because the EUR USD represents two of the world’s largest economies it can see significant volatility when economic data is released within either economy. Traders should also note that the interest rate differential between the European Central Bank (ECB) and the Federal Reserve (The Fed) can be a key factor in the overall trend within the EUR USD. Due to this forex pattern the actions of both the ECB and the The Fed is watched closely by ‘market makers’ for signs of new directional trends and future uncertainty.
There are several clear forex patterns regarding the euro dollar forecast, most notably that the EUR USD shows a viable positive correlation to the GBP USD. This is primarily due to the positive correlation of the EUR and the GBP. As a result, as you learn to trade forex you may see the EUR USD and GBP USD experiencing somewhat parallel moves during trending markets.
Currency Pair Correlations: EUR USD
Primary Trading Times For The EUR USD
Major Economic News Events affecting the EUR USD
Central Bank Data
In the Case of the EUR/USD both nations Interest rates merit significant attention.If ether the ECB or the Federal reserve have a dovish view on their economy and keep or cut interest rate, it is seen as negative, or bearish.
Although it must be noted that traditionally a cut in the interest rate is seen as a negative sign due to the Central Bank needing to intervene in the economy it only holds true for interest rates as long as the rate is below 2.00%.
Because of the fact the Euro Zone is comprised of multiple nations Jobs data does not have the same impact on the EUR and it does on the USD. With the monthly release of Non-Farm Employment Change and Non-Farm Payrolls figures on the first Friday after the end of the month representing some of the most important releases for the USD market.
U.S. Initial Jobless Claims which are published every Thursday are watched closely by financial analysts because they provide the most immediate insight into current conditions within the U.S. economy. Higher initial claims correlate with a weakening economy.
Consumer Spending & Inflation
U.S. CPI and Core CPI inflation figures form one of the most impactful releases for the USD markets. Data is published in two forms CPI Inflation and Core CPI Inflation. During bullish markets the standard CPI inflation measure carry’s the major market impact. However, During Periods of uncertainty or negativity markets concentrate much more heavily on the Core CPI inflation data as this gives a clearer picture of the state of the US economy by removing temporary factors that may cause price inflation/deflation in the short term.
Due to the nature of the Euro Zone there are two separate major CPI inflation releases that have a significant impact on the EUR. German CPI and Core CPI inflation is the first to be published each month, traders watch this release carefully as Germany is the largest economy within the EUR and changes to Consumer Price Inflation within the euro zone will usually be seen within this figure.
Our second major release is the Euro Zone Harmonised Index of Consumer Prices (HICP), which acts as an indicator of inflation and price stability for the European Central Bank (ECB). It is a consumer price index which is compiled according to a methodology that has been harmonised across EU countries.
Economic Sentiment & GDP
German ZEW Economic Sentiment Is a leading indicator of economic health within Germany and therefore is seen by many within the Forex markets as an indicator of the health of the EUR. Preliminary Quarter-on-Quarter GDP for both the US and Euro Zone is considered to be two of the biggest releases within the EUR USD pair.
Gross Domestic Product is a measure of the total value of all goods and services produced and the figure published represents the percentage change for the reporting quarter comparative to the previous quarter. As a result, GDP data for both economies can create an average of a 90-150 pip move within the EUR/USD when ether economy publishes their data.