When it comes to sheer popularity, some currency pairs clearly outrank others—with EUR/USD near the top of the pile. Due to how frequently it is traded, it offers an impressive amount of liquidity, as well as a tight spread that draws many traders in. Though it is one of the most popular, it may also be the most intimidating, which is why many aren’t sure how to actually trade it. We’re here to help. The following takes an in-depth look at the EUR/USD currency pair, explaining when and how to trade it effectively.
The Ideal Times to Trade EUR/USD
It’s been said a thousand times in the past, but still rings true today—when it comes to forex trading, timing is everything. Obviously, you can trade EUR/USD at any time, but that doesn’t mean that you should. If you’re looking to trade the EUR/USD pairing, you should trade at the most active time which is between 08:00 and 22:00 GMT, when London and New York are both open.
If you look at the EUR/USD hourly volatility chart, you’ll notice a few things. There is an increase in movement starting at 07:00 GMT, and this continues until 20:00. At this point, the movement will begins to taper off each hour, meaning there are less likely to be price moves that traders can take advantage of. This means that the acceptable time window to trade is between 07:00 and 20:00 GMT.
Let’s pare that window down a little further. Although 07:00 to 20:00 GMT is acceptable in terms of market activity, the ideal time is more likely to be 13:00 to 16:00 GMT. This is the period of time where you’ll see the biggest price moves, so you’ll see greater profit, with spreads and commissions having less impact. We understand that not everyone is a full-time trader, so time constrictions are something that most will face. If you trade on the side or as a hobby, you may not be able to choose exactly when you trade. For those that have EUR/USD interest but are short on active trading time, trading during the 13:00 to 16:00 GMT window is ideal.
Addressing Common Market Triggers
The main things that you want to worry about when it comes to trading the currency pair of EUR/USD—other than time—are price movements, what triggers them, and what direction they’re moving. Determining price movements relies on one key element—the difference in interest rates between the Fed (United States Federal Reserve) and the ECB (European Central Bank). The EUR/USD currency pair can actually be driven down by the dollar’s strength, as well as the prosperity of the U.S. economy. If the Fed intervenes to weaken the dollar, the EUR/USD can be sent up.
What you really need to understand as a trader is that the EUR/USD pair is largely linked to current economic events. Considering the amount of countries actually contributing to the currency pair (Spain, Italy, Germany, and France, as well as the United States), you’ll need to keep a watchful eye on economic events throughout Europe and the United States in order to stay ahead of market volatility. No matter where the news comes from, it has the ability to create market volatility with EUR/USD.
The EUR/USD is a high liquidity forex pair—that much is obvious—but success when trading it comes down to approach, strategy, and timing. Remember, for EUR/USD, half the battle is picking the perfect trading window time and having one eye on the related economic news.
The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.