The best way to predict the movement of any instrument is a combination of technical and fundamental analysis. Therefore, before entering the market, you should study the features of the selected currency pairs. Today we will focus on the euro.
What Affects EUR
Let's take a glance at the events and readings that drive the euro quotes:
- Inflation rate. Consumer price levels will help you with the analysis. The highest influence is exerted by the indicators for the European Union, Germany and France. These data will tell you about the changes in the cost and demand for services and goods. And that directly affects inflation. With the growth of indicators, the euro is strengthening. With a decrease, accordingly, it falls.
- US dollar value. EUR and USD are the main competitors in the foreign exchange market. A drop in value and demand for the US dollar leads to an increase in purchases and the strengthening of the euro.
- Economic growth in the European Union. Pay attention to the GDP readings. With a significant increase in production in the European Union, the currency is growing as well. The market is experiencing an increase in volatility which promises tangible profits for traders.
- The level of economic sentiment. The main influence on the euro is provided by the indicators of Germany. The optimistic mood of the investors leads to the strengthening of the EUR, the pessimistic one leads to its drop. Typically, analysts make assumptions about future economic sentiment. If the indicators exceed analysts' forecasts, then the euro will go up. At low rates, the EUR may decline.
- Monetary policy. Watch closely the actions of the ECB. Monitor the Central Bank interest rate data release and ECB leaders' speeches in your economic calendar. As a rule, press conferences announce further plans for the national currency. A hawkish (optimistic) outlook means further growth in interest rates and a strengthening of the euro. The dovish (pessimistic) statement hints at the absence of rate changes which will lead to a decrease in the value of the national currency.
Which Instruments to Choose
There’s not much to think about. The EUR/USD pair is the most reliable and simplest instrument. Especially for a beginner. Start your acquaintance with the euro with this currency pair. The popularity of the instrument is ensured by high volatility and liquidity which are indisputable advantages for any trader. Give preference to the European and American trading sessions, especially their intersections. During this period the market offers the majority of great trading setups.
Another quite popular pair is EUR/GBP due to the high stability of both currencies. The volatility on this instrument is lower than on EUR/USD, but the risks are lower. Experienced traders keep this currency pair in reserve and enter the trade when strong fluctuations appear.
Most traders get to know EUR in one way or another while trading. If you want to get the most out of euro trades, keep the economic calendar on hand. This will increase your chances of success and enlarge the return on each trade. Good luck!