If a question arises, which pair is suitable for beginners, usually experienced traders will give the EUR/USD pair. The reason is, the EUR/USD exchange rate pair always fluctuates with a high daily average movement and low spread costs. Some brokers may offer spreads below 1 pip but the average broker takes the EUR/USD spread pair at least 2 pips.
The EUR/USD pair is very popular among traders because it is also one of the major pairs that many traders trade in this pair. Sometimes might you found this pair in the symbol EURUSD without the slash, It the same pair because the writer only makes it is simple. Then what and how is this pair? Learn more in this article. Maybe you will find some important notes for your investment.
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EURUSD is a currency pair in forex trading where EUR represents the Euro and USD represents the US dollar currency. The writing of the currency symbol consisting of three letters gives the meaning that the first two letters represent the country of origin and the last letter is the name of the currency. EUR is European currency with the name euro. and USD is the US currency under the name dollar.
EUR in EURUSD is the basic currency, and USD is the quote currency or counter currency. So if you trade on the platform with a buy action. This means that you buy Euros using US dollars. If for example on the chart you see this pair with a quote of 1.1220, it means that 1 Euro at that time is equivalent to 1.1220 USD, the four digits behind the decimal are fractional values while the value 1 represents the true value. This means that to buy 1 Euro you need 1,220 USD. In this case, the value of the Euro currency is higher than USD because to buy 1 Euro requires a larger amount of USD.
Conversely, if on the trading platform you take a sell action, it means that you are selling Euros to get USD currency. As a general rule, selling is releasing goods, and buying is taking goods. However, because in forex you don’t hold the physical money, you only get the transaction value that is visible on the platform.
EUR/USD pair characteristic
In general, the characteristics of the EURUSD pair are low spread costs compared to other pairs. Especially cross pairs, this has the lowest spread. This is why the EURUSD pair is often traded for short-term or scalping strategies.
Apart from high liquidity, several characteristics of the EURUSD pair are:
- The average daily range of price movements on average is between 90 and 100 pips, providing good opportunities for skilled traders.
- Gaps or price jumps are rare. Even if there are price jumps, it is only in the range of 10-20 pips under normal conditions. Price jumps are usually due to the short response of market participants to important data or news announcements.
- Often retest support and resistance areas. The EUR/USD pair often touches support or resistance values many times. Can be a reference for traders to open a new position.
- The EUR/USD pair has a negative correlation or against the direction of other pairs, especially USD/CHF, while the correlation is positive or in the same direction as GBP/USD.
The correlation between the currencies will not always be the same. Although EURUSD tends to have the same trend movement as GBPUSD, sometimes the two pairs move in opposite directions. This is of course related to the fundamentals of each currency. This is why it is important to follow the fundamental news where currencies are traded.
The factors affect EUR/USD
Factors affecting EUR/USD are mainly due to US economic news and data. Besides America, it is also affected by news and economic data from the European Union. Although in the short term, US news is more dominant.
The European Union (EU) is generally dominated by Germany and France. The following are economic data that affect EUR / USD:
- ECB interest rate policy and press conference.
- Speeches of European ECB officials and finance ministers.
- EU Consumer Price Index (CPI). Including the National CPI and Producer Price Index (PPI) reports.
- EU economic indicators of confidence.
- Survey of consumer and investor sentiment (Ifo, ZEW, and GfK).
- Industrial sector production data.
- United States Non-Farm Payrolls (NFP) data, which released the number of new workers outside the agricultural workforce.
- The FOMC rate decision often called the FOMC statement or announcement of the United States central bank policy includes the benchmark interest rate. If the Fed raises interest rates the US Dollar will strengthen and vice versa.
- FOMC meeting minutes: will provide an overview of the upcoming Fed interest rate. If the interest rate tends to rise, the US dollar will strengthen and vice versa.
- Unemployment data in Germany. The indicators released each month can be considered as an illustration of the overall unemployment rate in the Eurozone. The release results that are smaller than the predictions will have a positive impact on the Euro value, and vice versa.
- European GDP: Gross Domestic Product is the result of production output as an indicator of economic growth in a region. If the release is greater than predicted, the Euro will strengthen, and vice versa.
EUR/USD historical price chart
The euro (€) is the currency used in the 19 member states of the European Union. This currency began to be used on January 1, 1999, but physically it was only used on January 1, 2002.
Euro notes look the same everywhere, but the coins on the back are different. The coins of each country are given their own symbol according to the identity of each EU member state in the Eurozone.
The historical EUR/USD price chart when referring to the Tradingview EUR/USD 1972 – 2020 chart. The lowest price since January 1972 was at 0.5380 and the all-time high was at 1.6000 in July 2008.
EUR/USD and gold correlation
EURO is the second largest currency that is widely used around the world after USD. Therefore, when correlating with gold, EURUSD also often has a positive correlation with gold. Meanwhile, gold is negatively correlated with the USD. Therefore it often happens that if the USD weakens, gold will strengthen, as well as EURUSD, where the euro will strengthen.
So even though it’s not exactly the same, if the gold price goes up, EURUSD is also in an uptrend. This correlation can be seen in the price chart below which I took from SunshineProfits.com. The red line represents the EURUSD pair, and the yellow line is for the gold price from 1999 to 2020.
If we compare the EURUSD chart with Gold above in 2020, an increase in gold prices has a higher transaction volume compared to the Euro. This may be due to a pandemic condition that has an effect on changes in currency prices.
EUR/USD and GBP/USD correlation
By understanding the correlation between pairs, sometimes it is needed as material for technical analysis for a trader. This is one way to make a comparison of the trend direction in one pair against another. In this case, we are talking about GBPUSD and EURUSD, where these two pairs are major pairs that are traded by many traders.
And if you often pay attention to the movement of the EURUSD and GBPUSD pairs, both of them have a positive correlation. This means that a positive correlation is a tendency for the movement of the two pairs to go hand in hand. If EURUSD is in an uptrend, then usually GBPUSD is also in an uptrend.
Why does this happen? We see that both pairs use the USD as a quote currency. In general, if the USD currency is strengthening, it will happen in almost all pairs that have USD elements.
To measure how strong the correlation, usually use the numbers +1.0 which is the highest positive correlation value, and -1.0 for the highest negative correlation value. The meaning of positive correlation is almost the same movement, and negative correlation is a movement that tends to be indifferent or opposite directions.
While the correlation score between the EURUSD and GBPUSD pair is +0.94, meaning that the trend movements of the two pairs are almost the same.
However, it is not an absolute value, the correlation value can change due to various factors, especially demand and supply in each currency. Sometimes you may find EURUSD is in flat condition, while GBPUSD is seen in an uptrend.
Figure 1 above is GBPUSD and image 2 below is EURUSD. We see that the trend tends to be in tune, but by forming a slightly different pattern. EURUSD tends to price in a range, while GBPUSD is in a bullish trend.
In this example the correlation score of the two pairs is not +0.94 but drops to +0.70, this will help you determine a strategy to capture profits.
EUR/USD best trading time
The EURUSD pair is one of the traders’ favorite pairs, but when is the right time to trade? If we analyze each market session, which is divided into 4 market sessions, Sydney, Tokyo, London, and New York.
Of the four sessions that have the highest moving average is the London session, also known as the European session. Next is the New York session, and the best time to trade the EURUSD pair is the London to New York session, where when the time overlaps there is often an increase in trading volume so that price movements become more volatile.
In each day, there are certain times when the price movement is more active than the time in other hours. From the picture above, the ideal time for trading is at 13.00,14.00,15.00 GMT. This is the time where there is an overlap between the London session and the New York session. This means that when the London session is still in working hours, starting at 08.00 GMT and closing at 16.00 GMT.
Before the London session closes, the New York session opens at 13.00 GMT, so that the hours of 13.00,14.00,15.00 and 16.00 the London and New York sessions are in working hours. With more traders at that hour, ideally, price movements will be more active. This reason is what makes many traders scalp.
EUR/USD daily volume
EURUSD is a major pair, so the daily average volume is high. Citing from CME Group, the highest volume of Euro FX volume occurred on 09 November 2020 with a total of 249,569.
Daily volume is not always the same, on a quiet day it even reaches 89,848. If you take volume the average Euro FX volume reaches 190,000.
The daily volume of the EURUSD price of 200,000 causes the pair to change its price with an average high of 100 pips on the daily average.
With a high moving average, the chances of getting profit are easier. Euro trading volume is also influenced by important news released in the economic calendar schedule. The influence of high impact news can contribute to an increase in EURUSD trading volume.
EUR/USD Forecast and analysis
EURUSD forecast is often used as a reference in forex trading by traders, you can find several large websites that predict the EURUSD price in October 2021 or a year in the future the EURUSD value tends to be flat.
Trading economics predicts that the EURUSD price in the next year will be around 1.1600 and 1.1800. This is a flat or sideways condition based on their forecast.
Meanwhile, Wallet investors also predict that the value of EURUSD in the next year can reach 1.1600 a year later, this is not different from the forecast results from trading economics.
EUR/USD technical analysis 16 November 2020
At the beginning of this week, EURUSD tends to be in a bullish trend condition, this can be seen on the moving average line which is below the price, and the RSI shows the 54 level which is the uptrend marker level.
At the beginning of this week, there was a gap which was quite surprising, EUR/USD appeared to be moving volatile, but started to form a bearish candle. This means that the uptrend which dominated the weekend has begun to fade or weaken.
While looking at the perspective in the H1 timeframe, MA 9 has headed down above the price, meaning that there has been a temporary trend reversal contraction.
Overall, since the pandemic, the euro has also depreciated, the sideways condition has been going on for quite a while. In the short term scenario, the price may move up following the formed pattern, which is in a bullish trend.
EURUSD is the recommended pair for beginners who are just learning. With a fairly high daily average, it provides traders with opportunities.
However, EURUSD has its own character, because, on a low timeframe, this pair is quite volatile, making it suitable for beginners and all traders. Almost scalpers usually use EURUSD for trading.
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