EUR/USD - A Report Brought to You by Q8 Trade
The EUR/USD is the most widely traded forex pairs in the world and is one of the most popular foreign currency pairs on the trading platform of Q8 Trade.
The pair refers to the number of US dollars (the quoted currency) needed to buy one euro (the base currency).
The EUR/USD pair is one of the major Forex pairs accounting for more than half of the world’s trading volumes.
The pair refers to the trading of the currencies of the world’s largest economies, the Eurozone (the European continent) and the US dollar, which represents the world’s first economy.
It is the most traded around the world among the Forex pairs.
EUR/USD Historical Overview
The euro was created in 1992 after the Maastricht Treaty. In 1999, it was traded among European Union member states. In 2002, the euro began trading among EU member state, which was accepted by many countries as its primary currency making it the second most traded currency after the US dollar.
19 of the 28 EU countries use the euro as the country’s official currency. According to data from the European Central Bank, since the beginning of 2017, more than one trillion euros are traded around the world.
The dollar has the greatest impact on the world economy as a whole. It is widely used to implement transactions between all countries of the world. Most of the reserves of central banks around the world are in US dollars and some small countries take the dollar as their official currency.
How is the value of the EUR/USD pair determined?
If the euro is worth $1.2, you need $1.2 to buy 1 euro. Of course, this value changes almost instantaneously over the five trading days.
What makes the EUR/USD interesting to trade?
The euro follows the economy of 19 European countries making it highly volatile. Certainly, there is not always consensus among officials on the one issue which leads to the euro taking volatile price movements on the basis of each of the 19 countries which makes it attractive to traders given its intensive price movement.
Is trading the EUR/USD profitable?
Many Forex traders around the world consider that the Euro against the US Dollar is the preferred pair compared to other foreign currencies for several reasons. Here are some of the benefits that make this pair profitable:
- The very narrow EUR/USD pricing means lower trading costs.
- The large trading volume in this pair makes the market a lot of liquidity.
- The volatility of this pair makes it receive many transactions in a moment.
However, before deciding which currency pair you would like to trade, we highly encourage you to learn more about what would you get from the platform that you choose to trade with and what are the advantages you will be getting from choosing a certain platform over another.
What factors affect the performance of the EUR/USD?
Interest rate reports are the single most influential factor in the change in the price of this pair, whether from the US or the ECB (European Central Bank). If the Fed raises interest rates, then the US Dollar rises.
In the same way, if the ECB raises interest rates, the euro gets a positive boost in performance and vice versa.
Another thing that affects the pair’s trading and should be taken into account is the Non-Farm Payrolls report in the USA. It is issued monthly and has a significant impact on the market both in the short and long term. So it is always advised to close the positions before the release of risk reports.
It is not the only report that affects the performance of this pair but also the CPI (Consumer Price Index) which measures inflation and the most important indicator to show the health of the economy. This is in addition to the GDP (Gross Domestic Product) data showing the weakness or strength of the country’s economy.
The PMI (Purchasing Managers’ Index) also affects currency strength, showing whether purchasing managers are optimistic or pessimistic about the economy in the medium term. This indicator is very important because central banks use data when formulating monetary policy.
The balance of payments, which shows how much money a country receives from abroad and how much you pay to other economies.
The same trading sessions also indirectly affect the pair. The pair usually trades little during the Asian sessions as the most important economic data and events for the pair are released during US and European sessions. Activity slows at noon and rises later when the US session begins. Liquidity is easing again at 5:00 GMT as traders in Europe close their positions.
The political instability affects the performance of the euro against the dollar. For example, elections and crises in European countries with major economies or the United States of America. In addition to politicians’ comments, let’s not forget the fall of the dollar after US Treasury Secretary Steven Mnuchin said that the weakness of the dollar is good for the United States.
How can you trade EUR/USD through CFDs?
Many traders prefer to trade the EUR/USD through CFDs as it increases their ability to speculate on the movement of this pair without actually owning the currency.
Given the size and liquidity of this pair, it is a common choice for many when they consider trading against the differences in the Forex market.
For example, if you decide to trade the euro against the US dollar and expect the euro to appreciate against the US dollar, you Buy. If you think the euro will fall against the US dollar, you Sell. If your expectation is correct, you’ll get a profit by the price difference.
Let’s make a numerical example:
If the euro is trading at 1.1640 / 1.1650, and you have expectations that the euro will rise against the dollar, you bought 100 of the standard contract from this pair through the contracts at 1.1650.
After a while, the pair gained 30 pips and the new price is 1.1670 / 1.1680. You decided to close your deal by selling the 100 basic CFDs at 1.1670.
You bought at 1.1650 and sold at 1.1670. The difference here is 20 points. Because you bought 100 basic CFD contracts in this pair, your earnings are 20x100 = $ 2,000.
The base contract value here is (10,000 Euros) and the point is equal to one dollar.
Advantages of EUR/USD trading through CFDs?
- Leverage: CFD Products Leveraged. This means that for CFD trading, you can deposit only a certain percentage of the full trading value called the initial margin. Your money is then magnified or raised and you receive a larger offer than you can afford.
Example: 1:30 leverage allows trading of $ 3,000 with a deposit of only $ 100.
Earnings are calculated on the basis of the full value of CFDs. Therefore, with a relatively small initial deposit, you can expect a large return and at the same time you may also suffer significant losses.
- Increased Trading Opportunity: CFDs increase opportunities for trading opportunities because they allow you to make a profit in markets that also decrease.
Example: CFDs are an agreement to exchange the price difference at the beginning and end of the contract. If you think the EUR will depreciate against the USD, use the “Sell” option. If your predictions are correct, the transaction will be closed by repurchasing the underlying asset and the price difference will be your profit.
- Hedging: Forex trading via CFDs can be a useful way to hedge or protect your investment portfolio from the risk of negative price movements.
Example: You trade in the EUR against the USD and you have already bought some pairs at a high price but with weak European data, the EUR is on the decline. You think you will lose but no, you can also make gains even when the negative price moves.
How to trade the EUR/USD with Q8 Trade?
- Select the financial instrument:
Choose the EUR/USD pair as the trading instrument you want to invest in. Q8 Trade offers more than 300 financial instruments. CFD is available across a wide range of tools including Forex, Commodities, Indices, and Stocks.
- Select Transaction Type:
Select the type of transaction you want to speculate on. If you think prices will go up, select Buy. If you think it will decline, select Sell.
- Enter Volume:
Enter the number of units you want to trade from the EUR/USD.
- Manage risks:
Take advantage of Q8 Trade’s stop-loss tools which ensure you close your deal at the price you set regardless of market volatility or gaps.
- Watch your deal:
You should monitor your transaction well, including stop or profit orders, to track your earnings or losses in real time.
- Close your deal:
If your transaction is not automatically closed due to stop loss or profit taking orders, close it when you are ready.
Why should you trade EUR/USD with Q8 Trade?
- Q8 Trade provides trading leverage in this pair so you will need a little capital to start your deal.
- Q8 Trade offers real-time pricing which makes it useful for you to buy or sell.
- There is no exchange fee since you do not have the actual asset. Therefore, CFD trading is simply a contract between you and Q8 Trade.
It’s the possibility of selling the EURUSD without having to buy it.