Forex forecast of the Euro Dollar exchange rate
The EUR/USD currency pair is the most popular and the most liquid. Therefore, it has always attracted the attention of many traders.
Features of the euro dollar spot rate
The euro/dollar currency pair is presented as the most popular instrument. But even this scheme causes cross-rates, so the rate is often affected by corrections in the value of other currency pairs, especially those that do not have the dollar (such as EUR against CAD and AUD). Much depends on the currency converter online.
Euro-dollar spot rate risks to decrease due to positive statistics and news from Asian countries, which is mainly reflected in the EUR/JPY pair. Maximum trading activity is concentrated simultaneously at two trading sessions: in America and Europe.
But sometimes the peak falls at the intersection of trading sessions. The main feature is the ability to easily predict the appropriate pair due to the uninterrupted flow of information. Thus, it is difficult for a trader to orientate in the direction due to the overabundance of news. However, the pair of dollars and euros will be an indicator for most strategies due to the volatility and liquidity.
General characteristics
According to the scale of economic indicators of national currencies, the standard currency is precisely the euro, and the dollar is only a quoted version.
Therefore, the euro/dollar exchange rate directly indicates that when there is favourable news in America and the dollar is predicted to surge, it is advisable to sell. And if there is an announcement about the growth of European currency against the American one, then it is much more profitable to buy a quote in reserve (the rate jumps up, so for 1 Euro it is necessary to give a big sum). This also works for the price converter from pounds to dollars.
Factors influencing the conversion of euro to dollar — what it depends on
The main influencing factors that can change the EUR/USD quote are gathered around the U.S. monetary strategy.
At the same time, there are a lot of spare levers that can officially control and change the flow of money:
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open market interventions;
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raising or lowering the discount rate;
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management of reserve requirements.
The Fed board has the power to directly change the terms of the last clause and the current rate. Standard open market operations are managed by a special committee, and by resorting to adjustments in any of these three factors, there is an effect on the amount of money.
The indirect relationship between the U.S. dollar and other currencies changes. That is why the Fed’s decisions are considered by default to be a priority nuance in the long-term interaction of the euro-dollar exchange rate.
The central leverage on the forecast of the euro against the dollar is considered the Federal Reserve’s interest rate on government funds. Based on this indicator credit institutions (national banks) make interest payments on a daily loan. The U.S. financial regulator modifies the interest rate when it is necessary to tighten or weaken the rate of the national currency.
Such manipulations directly affect both currency and stock markets, as the ECB regulates the monetary policy of European Union members. Fundamental decisions on the rate of European currency are approved only by the government, which is formed by representatives of the national banks of the EU member states.
The main objective of the ECB is to provide financial stability and to fully overcome the consequences of the global financial crisis that took place in 2008.
Like a large share of reserve currencies, the EUR/USD forecast reacts accordingly to any political instability. Therefore, the financial troubles of all EU members are immediately reflected negatively on the EUR/USD rate, which can always be seen from the dynamics like the price of the Euro during the recent economic downturn in Greece and Spain.
Macroeconomic statistics release is also a significant factor that influences the strengthening or reversal (downgrading) of the European currency. Check out letizo.com for the latest news on all of this.
How to trade the euro-dollar exchange rate profitably
There is a strong inverse correlation between EUR/USD (forecast) and USD/CHF quotes at the modern currency market, which reflects the close relationship between the euro and the franc. This situation depends on the financial state of Switzerland, which is strongly correlated with the events of the European Union regarding economy and politics. Often a decrease in this rate is followed by an immediate collapse of the EUR/CHF. In some cases, the situation repeats, but in reverse order.
A similar correlation is duplicated with GBP/USD due to the pound-euro ratio. Therefore, a trader needs skill and even intuition to make a profit using a successful forecast of the euro rate.
Often deals made within 15 and even 5 minutes allow getting a tangible profit. Increased trading ability and good liquidity turn this pair into the most effective instrument of influence on the international currency market.
