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Forex Course

165. Knowing More About Trading The Euro & Yen Crosses

Introduction

In cross-currency trading, the Euro and Japanese Yen are the most traded currency. Therefore, after major currencies, EUR and JPY has the highest liquidity in the forex market. Overall, trading in the Euro and Yen crosses are secure compared to the other cross currencies.

Understand the European Economy

When trying to trade in any Euro cross pairs, we should understand the European economy even if we only follow technical analysis. In technical analysis, traders can make decisions based on previous price movements. Therefore, many traders think that there is no need for fundamental analysis.

However, in trading, we aim to increase the probability of our analysis. Therefore, when we add Europe’s economic condition, we will have a better outlook of trading Euro crosses like- EURCHF, EURAUD, EURNZD, etc.

The European economy consists of several countries, including France, Italy, Germany, etc. Therefore, trading in the Euro cross requires to know interest rate decisions, retail sales, employment export-import, GDP, and other economic releases of these countries.

Moreover, in Euro cross trading, we should focus on other currencies that combine with the Euro. For example, if we want to trade in the EURCHF pair, we should focus on Switzerland’s economic condition.

Understand the Japanese Economy

In Yen cross trading, we should have extensive knowledge of the Japanese economy. Japan is an export-oriented country. Therefore, it tries to depreciate its value against other major currencies by keeping the interest rate lower.

Overall, any increase in interest rate, retail sales, employment, and GDP are suitable for the Japanese economy.

Besides the Japanese economy, we need to understand the economic condition of the Japanese Yen combination. For example, trading in the CADJPY pair requires a fundamental analysis of both the Japanese and Canadian economies.

Conclusion

Overall, the Euro and Japanese Yen cross are mostly traded currency in currency crosses. Therefore, to trade Euro and Yen crosses, we should know these two countries’ economic conditions. Even if we don’t trade based on fundamental analysis, having good knowledge is essential to have an overall outlook of the economy. Cheers.

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Categories
Forex Course

159. Understanding Forex Assets Classes

Introduction

The forex market is the world’s biggest financial market, where daily turnover is more than 6 trillion dollars. The most exciting feature of the forex market is that it has an enormous number of trading instruments that allow traders to diversify their portfolio. Besides significant currency pairs, cross pairs are very profitable as it can make e decent move.

What is the Currency Pair?

In the stock market, investors’ trade in a particular stock of a company. This is not similar to the currency market. In the forex market, traders usually trade on a currency pair instead of a single currency.

The combination of two currency indicates the economic condition of two separate countries. Therefore, if we want to trade on a currency pair, we should know at least two countries’ economic conditions. For example, if we want to buy EURJPY pair, our analysis should indicate that the European economy will be more durable than the Japanese economy.

Major vs. Cross Currency Pair

US Dollar is the most traded currency in the world. Therefore, any currency pair from the developed country with the US Dollars will represent the major currency pair.

A list of 6 major currency pairs are mentioned below:

  1. EURUSD
  2. GBPUSD
  3. USDJPY
  4. USDCAD
  5. USDCHF
  6. AUDUSD

If we eliminate the USD from these major pairs, we will find the cross currency pairs. Let’s say the value of EURUSD is 1.0850, and the value of AUDUSD is at 0.7150. Therefore, the value of EURAUD would be 1.39 (1/1.085X 1.085/0.7150).

Other examples of Cross currency pairs are EURGBP, EURCAD, GBPCHF, GBPAUD, CADJPY, EURJPY, etc.

The condition for cross currency pairs are-

  • The currency should be from the major pairs.
  • The cross pair should eliminate the US dollar.

Is Cross Currency Pair Trading Profitable?

Trading cross currency pairs is similar to trading major currency pairs as both technical and fundamental analysis work well in cross currency pairs.

For example, we can make a decent profit from the GBPJPY pair if we can evaluate the UK and Japan’s economic condition.

Conclusion

Trading in a currency pairs means to anticipate the price based on the technical or fundamental analysis. Therefore, if we know the two countries’ economic conditions, we can make a decent profit from cross-currency pairs.

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