How To Trade EURUSD Currency Pair- Know These Secrets_

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How To Trade EURUSD Currency Pair- Know These Secrets_ Powered By Docstoc
					Currency trading can be exciting and lucrative. Elections, strikes and sudden breaking
news either good or bad can lead to significant trading profits. It you stand ready to
trade currency market is a great market.

Europe is a predictable part of the world. France, Germany and Italy the largest
members of the European Union (EU) usually have high budget deficit and tend to
keep the interest rates more stable as compared to United States. One of the most
heavily traded currency pair is the EURUSD. Now when trading EURUSD, you need
to keep an eye on what is happening in both US and Europe.

FED tends to follow a more free market approach with frequent adjustment to the
interest rates. The general policy of the FED is to make USD trend in one direction
for a long period of time. Now, technical analysis when combined with fundamental
analysis can be a great tool in the arsenal of a currency trader. Fundamentals can tell
you the long term general direction of a particular currency.

Now, the most important thing that you need to keep in mind while trading Euro is
that the European Central Bank (ECB) tends to take a strict policy against inflation.
This has something to do with the period of hyperinflation experienced by Germany
after the First World War that had devastated the German economy and the German
working class. With history at the back of their minds, ECB raised interest rates more
than it lowers it.

Now, another thing that you need to keep in mind is the politics and economic growth
is interlinked. When US economy slows down and interest rates are lowered by the
FED just like the present, money starts to flow abroad. In the past, it used to be Japan.
But the market knows that the Japanese Central Bank (JCB) does not like a strong Yen
(JPY). So it starts selling JPY to stabilize it. This means that the default currency
when USD weakens is the Euro now.

On the flip side, when there are economic and political problems in Europe especially
when the European economy is slowing down and the British economy is showing
signs of strength, market often sells the Euro. Now fundamental analysis is going to
tell you the long term behavior of a currency pair. When you trade daily, you only
look at the charts. This is the one and only truth that matters for a currency trader, you
only trade what the charts show you.

				
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