How the EUR/USD Price Changes?
The movement of this pair is determined by the economic conditions in the European region and the United States. However, the dollar is a force unto itself – it’s significance extends far beyond the physical territory to which it is attributed.
Popular commodities like oil and gold, which are of heavy significance in the world economy, are typically denominated in dollars.
As for the European region, it happens to be the largest economic bloc to use a common currency. Therefore, the EUR/USD pair is a currency combination that the world constantly monitors.
When is the Best Time to Trade the EUR/USD Pair?
Even with its stable liquidity throughout the day, there are times when trading the EUR/USD pair is more appropriate; and that is when the European and the American trading sessions are active. But this is not always the case – your strategy will also give you an idea of when it might be more appropriate to trade this pair.
If your trading is a little long-term, it does not make much difference which session you decide to trade. But if you want to profit from short-term binary options contracts, then you will have to wait for the US and the European trading sessions because there is more volatility at this time.
Important News to Track as you Trade the EUR/USD
News will often cause the largest short and long term movements in the EUR/USD pair. With the euro, announcements by the ECB (European Central Bank) usually have the greatest impact on the euro. However, economic news from the leading European region economies can also affect the euro in one way of another.
For the US, you should keep an eye out for announcements by the Fed, particularly the regularly released Non-Farm Payrolls data and interest rates.
How to Interpret the news affecting the EUR/USD in your Favor
Knowing about the news that affect this currency pair, and receiving them on a timely basis, is only half the battle. You have to know how to use this information to trade as well.
This boils down to understanding whether the news item just released lowers the value of the dollar or the euro in the eyes of the traders. But just to clarify, when news released by the Fed make the dollar seem weaker, then you can expect the EUR/USD rate to go up.
The value of this currency pair will also increase if the European region releases economic data that makes the euro stronger. Therefore, under any of these two scenarios, you can make binary options trades that will win you money if the pair rises in value.
The converse is also true. If the the news indicate that the dollar is getting stronger, then you can expect the EUR/USD rate to go down. The same should be expected when the European region releases information indicating that the euro is getting weaker.
How to Tell if the News is Bad or Good
How exactly can you tell that the recent jobs data by the Fed is better for the dollar or worse? This can be a difficult call to make for novices. That is why it is important to know how each significant news item affects the currency value in question.
For instance, if the Fed releases jobs data showing an increase in unemployment levels; that is bad for the dollar. It therefore means traders and investors will find the dollar less desirable, making it go down in value.
In such a scenario, you can expect that the EUR/USD rate will rise because the euro will be stronger in relation to the dollar. It is also important to understand how interest rate changes affect the value of a currency.
For instance, higher interest rates are good for a currency because they attract foreign investment. This in turn increases the currency’s value in relation to the other currency. So, if the Fed increases the interest rates, the dollar would grow in value, causing a decrease in the EUR/USD value.
That is why it is important to understand what the news means for the currency value so that you don’t enter the market in the wrong direction.
Other Ways to Trade the EUR/USD
Following the news is a great way to get insight into this currency pair. But if your trading preferences lean towards the use of technical analysis, following the news might not be very appealing to you.
In this case, you can use any of the several time-tested technical tools forex traders regularly use to make money using this currency pair.
What are the Technical attributes of the EUR/USD pair?
Each currency pair has a certain ‘personality’. On average, EUR/USD is not the most volatile, which makes it quite dependable to users of trend-based indicators. Of course, you should throw in another indicator or so, such as the RSI, so that you get less false signals.
Luckily, many leading binary options companies now provide trading platforms that are also equipped with popular technical indicators. So, using this approach to determine when and in what direction to enter the market as you trade binary options should be much easier.
The Best Way to Trade EUR/USD in Binary Options
The truth is that neither of the trading conventions mentioned above is completely adequate, although either approach will help you make some money from this market.
To trade this currency pair, it is important to use technical indicators and at the same time follow the news to know about the fundamentals pushing the pair in one direction or another.