How to Trade EURUSD Currency Pair? Know These Secrets

http://www.FapTrader.com - How to Trade EURUSD Currency Pair? Know These Secrets - 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.

On the other hand, Federal Reserve Bank (FED) in US follows a more liberal and market oriented approach. Interest rate is seen as a tool to adjust the economic activity. Low interest rates tend to favor economic activity. FED tends to keep interest rates low. Right now, interest rates in US are low in order to generate more economic activity and employment. FED printed a lot of greenback after the stock market crash of 2008 to help a lot of failing banks. Many banks are supposed to fail in 2010. Under TARP, a lot of money was dished out to failing banks and insurance companies. This increase in money supply is going to be inflationary in the long run. But right now FED is content with low interest rates as this is required to defreeze the economy from a credit crunch that happened when banks started to fall like dominoes. FED tends to keep USD trend in one direction for long periods of time. USD may lose it's value as inflation heats up in the economy.

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.

Another effect that comes with the lowering of interest rates is the flowing of money abroad from US to other high return destinations where investors can have a good yield. Now, in the past money used to flow to Japan. But when in Japan also experienced a decade of stagflation and lowered its interest rate to almost zero, money flow went to the Euro Zone. Now this flow of money into Euro means that when USD grows weak or loses its strength, Euro become strong.

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.

Mr. Ahmad Hassam has done Masters from Harvard. Get these Forex Scalping Cheatsheets plus the Ultimate Swing Trading Software FREE




How to Trade EURUSD Currency Pair forex These Secrets

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[binaryoptionspro]

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