Investing Eurusd- Four Essential Benefits And The Disadvantage Of Trading Eurusd

The Euro is the second most used currency behind the dollar.It is used by the 16 countries that comprise the Euro zone.Consequently we cannot undermine the fact that the EURUSD is the most traded currency pair and also the most important.It is so important that the movements of the EURUSD often give a direct indication of what is presently going on in the world of finance.It is great for those new to FOREX as it moves at a sluggish pace compared to the other majors.It is also negatively correlated to the USDCHF but positively correlated to the GBPUSD.

Fundamental Characteristics of the EURUSD

1.It typically has a Bid-Ask spread ranging from 1 to 3 pips.

2.Average daily range of the pair is 90-100 pips

3.The most advisable time of dealing the pair is throughout the Euro session i.e. between 8 GMT and 17 GMT.

Most Important Factors that affect the quote of the EURUSD pair.

1. When trading the EURUSD the most important factor you should know that affects the quote of the pair is the difference in interest rates between the FED and the ECB.

2. Traders should also know that a strengthening dollar leads to a decrease in the EURUSD quote.

3.Primary activities by the FED affect the USD therefore influence the pair directly.

Pros of trading the EURUSD

1.The most significant reason and greatest pro of trading the EURUSD is because it has a very high liquidity.

2.It is a mixture of the two most used currencies in the EUR and USD,therefore it is the most traded pair and therefore worth trading because everyone trades it.

3.The combination of the above factors lead to our third reason being the EURUSD has very tight Bid ask spreads.Bottom fact: you can make a lot of money with the EURUSD but pay minimum commissions and spreads.

4.The pair has a historical correlation with other major pairs like the USDCHF (negative correlation) and the GBPUSD (positive correlation).This means it is easy to confirm analysis of the pair by looking at the movements of other pairs.

Con of trading EURUSD

It is unimaginable to think such a liquid pair with tight spreads has a disadvantage.But yes! The EURUSD has a drawback Volatility The EURUSD is a very volatile pair.Its riskiness is due to its direct linkage to global economic events.This high instability means the EURUSD is riskier in relation to other less volatile currencies.

Conclusion

The realization is if you have a good grasp of both your fundamental and technical analysis then the EURUSD is for you.If you lack any one of these areas the EURUSD market may dazzle you because it has huge volatility and has the tendency to range from time to time.