The following is a guest post. Enjoy!
One currency pair enjoys so much trading volume that it is almost synonymous with the whole world of foreign exchange (forex).
The EUR/USD currency pair sometimes nicknamed ‘fiber’ by some traders, tracks the movement in value between the world’s two most liquid currencies, the Euro and the US Dollar.
But what makes the EUR/USD such a popular trading choice?
One reason is the large number of multinational corporations (MNCs) actively trading both in the US and in the Eurozone. These businesses have an ongoing interest in the currency pair, given their need to actively hedge against exchange rate volatility.
That same volatility is also an attraction for newcomers to the world of forex trading. Given the large number of worldwide market participants, liquidity is never in short supply on the EUR/USD. This makes it a great option for those interested in opening short-term positions on the pair, such as day-traders. The pair’s continuous and incremental changes, driven by ample liquidity, are important to discerning short-term market trends.
The pair can be significantly affected by geopolitical and economic developments in both the US and the 19 Eurozone countries, where the currencies are the official tender.
For those with a keen eye for spotting how global events play into market fluctuations, the pair offers the possibility to take positions based on the expected outcome of major world events, such as elections, monetary crises, and even wars.
Knowledge of the Eurozone’s ‘macro-economy’, including the complex monetary policy administered by the European Central Bank (ECB) in Brussels, will also play dividends for traders looking to explore the pair. On the US side, policies set by the Federal Reserve (or simply the ‘Fed’) can have a significant impact on the rate.
Given the prominence of the pair, customers also have a vast array of trading websites from which to choose from when looking for an outlet that supports the pair.
For both newbie and veteran traders wishing to find a currency pair that affords plenty of possibilities to leverage both short-term and long-term trading strategies, the EUR/USD is a great place to start.
