Comprising the currencies of the two world’s largest economies, EUR/USD is the most actively traded forex pair in the world. High trading volume ensures sufficient liquidity and relatively tight spreads for the EUR/USD pair, making it very attractive particularly for beginners. Let’s look at a few ways to increase your profit from EUR/USD trading.
Key points
- EUR/USD is the most widely traded currency pair;
- The pair’s high liquidity and moderate volatility make it a great choice for forex newbies as much as for experienced traders;
- The most active hours for trading the pair are the overlap of the European and the North American trading sessions (5:30 pm – 7:30 pm);
- EUR/USD has a positive correlation with GBP/USD and a negative correlation with USD/CHF;
- The EUR/USD trading activity increases during the major European and US economic releases, such as Fed and ECB monetary policy changes, Nonfarm payrolls, GDP data, etc.
About EUR/USD
EUR/USD is one of the so-called major currency pairs. It represents the price relationship between the currencies of the European Union and the United States. EUR is a base currency, while USD is a quoted currency, that reflects the price of the euro. Hence, a good prospect on the European economy is likely to make EUR/USD rise and encourage traders to go long on the pair (buy it). Conversely, the bad expectations about the price of EUR/USD will prompt traders to go short on the pair (sell it).
Why Trade the Euro in India
There are a few reasons why it is a good idea to start forex trading with EUR/USD. First of all, trading major currency pairs (including EUR/USD) is considered safer than trading minors or exotics. It is because of high liquidity, or the ease of buying and selling the pair. It also means that any abrupt and drastic shifts in the quotes are unlikely to happen. Plus, the cost of transactions is low for the major pairs. The difference between the bid and ask price in the EUR/USD pair is rather low, which means lower expenses for a trader.
The EUR/USD volatility also plays at the hands of a trader. Although the pair is far from being the most volatile of all forex pairs, its volatility allows profiting from daily price fluctuations without too much risk.
Best Time to Trade EUR/USD in India
India is rather far from Europe and the US geographically. However, it doesn’t mean that Indian traders can’t benefit from the most active market hours.
| Trading session | Opening Indian Standard Time (IST) | Closing Indian Standard Time (IST) |
|---|---|---|
| Frankfurt trading session | 11:30 am | 7:30 pm |
| New York trading session | 5:30 pm | 2:30 am |
The time when both the European and the North American trading sessions are open is between 5:30 pm and 7:30 pm. These are the most active EUR/USD trading hours. By trading the currency pair during those hours, you will not only benefit from the high liquidity of the pair but also from tight spreads. However, it is worth saying that trading during those hours does not guarantee one makes a profit. Thus, make sure you have a well thought-out strategy to base your decisions on regardless of the time of trading.
Read more: Guide to Forex Trading in India
Trading on News
Although the time between 5:30 pm and 7:30 pm is considered great for trading EUR/USD, there are occasions that may be great for opening a position beyond those hours. Any news that affects the strength of the US dollar or euro should be closely followed by anyone who is serious about trading the EUR/USD pair. You can subscribe to our newsletters to receive weekly economic calendar events, as well as market updates, and forex trading recommendations.
The most important economic releases that tend to affect the euro include those that reflect the Eurozone’s monetary policy changes (ECB press releases and speeches), inflation level (Eurozone Core CPI, German CPI, French CPI), Eurozone GDP, Economic Sentiment German ZEW Survey, etc. Positive changes in the above-mentioned indicators are likely to make the euro grow. Conversely, if the release turns out below economists’ expectations, the EUR/USD will likely decline.
The United States, on the other hand, can shake the quotes with the following releases: nonfarm payrolls, the US GDP, trade balance, industrial production, and retail sales. Traders should also pay special attention to Fed’s meetings and the Fed’s chairman’s speeches that may reflect any possible changes in the country’s monetary policy. Since the US is a quoted currency in the EUR/USD pair, positive data on the dollar’s side may contribute to the fall of the pair. Contrarily, negative data from the US strengthens the euro against the dollar.
EUR/USD vs. Other Forex Pairs
EUR/USD is influenced by other currency pairs. A correlation between currency pairs can be either positive or negative. A positive correlation means that two given forex pairs tend to move in the same direction. In other words, if one currency pair grows, the other one grows too. A negative correlation means that if one currency pair rises in price, the other one is likely to decline.
The EUR/USD is positively correlated with the GBP/USD currency pair and negatively correlated with USD/CHF. Knowing this, you might want to follow up on what happens to these two currency pairs too.
Read more: 10 Most Stable Forex Pairs to Trade in 2022
Final Words
The high liquidity of the EUR/USD currency pair offers great opportunities for day trading. To benefit from the pair’s intraday fluctuations, traders choose to enter the market during the European and the North American sessions. The overlap of those trading sessions (5:30 pm to 7:30 pm India Time Zone) is when the pair is the most actively traded. Beyond those hours, the time of economic news releases triggers changes in the EUR/USD quotes. If you decide to trade EUR/USD, consider doing it while the market is most dynamic.
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by , 2021.11.01