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EURUSD: what it is and how it works

EURUSD is a very familiar currency pair in the forex market. The EURUSD pair is known to be the most traded currency pair globally. This article helps traders learn about the meaning of EURUSD, the factors that affect the rate of this currency pair and the best EURUSD trading hours.

What Is EURUSD? MEANING OF EURUSD

EURUSD is a currency pair between the euro and the US dollar. The EURUSD pair indicates how many US dollars (the quote currency) are needed to buy one Euro (the base currency) in the Forex market.

In other words, trading the EURUSD pair means exchanging the euro rate.

For example, the EURUSD rate is 1.13, which means that to buy 1 EUR, the trader must use 1.13 USD, or 1 EUR is equal to 1.13 USD.

As EURUSD is the most traded currency in the world, it is also the most liquid currency pair with the lowest spreads.

What does the increase and decrease in the EURUSD rate mean?

Like other currency pairs on the forex market, the EURUS rate is constantly changing. A change in the EURUSD pair rate represents the changing correlation between the two currencies in the pair.

For example:

  • When the price of EURUSD increases (for example, from 1.15 to 1.17), the EUR will increase in its value against the USD.
  • When the price of EURUSD falls (for example, from 1.22 to 1.19), the EUR depreciates and the USD increases in value.

The base currency (EUR) of the EURUSD currency pair is fixed and always represents one unit. Therefore, the EURUSD rate may rise due to the strengthening of the EUR or the weakening of the USD. One of the two conditions leads to the increase in the EURUSD rate and the display in the price chart.

Factors influencing the EURUSD exchange rate

The EURUSD currency pair is a representation of the exchange rate of two currencies, the euro and the US dollar. Therefore, the exchange rate of this currency pair is influenced by fundamental factors such as government policy and the economy of supply and demand in the money market for this currency pair.

Interest rates are a factor that directly affects the EURUSD rate. Traders can follow the ECB (European Central Bank) and the Fed (US Federal Reserve Bank) to capture the exchange rate movements of this currency pair. The Fed publishes the Federal Funds rate eight times a year, while the ECB publishes the monthly rate.

Traders can follow the statements of interest rates, the future political direction of the two most powerful central banks from which to make judgments on the EURUSD rate.

The occupancy rate also affects the EURUSD rate. In the United States, nonfarm payroll data is released by the Bureau of Labor Statistics on the first Friday of each month. Non-farm payroll data provides insights into THE VOLATILITY OF EURUSD. In Europe, the number of established jobs in the region and that of major economies such as France and Germany also have a significant impact on the price of the EUR/USD pair.

When is the best time to trade on EURUSD?

The foreign exchange market is open 24 hours a day, five days a week, except Saturdays and Sundays. However, it is not always the right time to trade any currency pair. Traders should only enter trades at the time when there are multiple participants in the market.

The EURUSD pair is most actively traded when the London or New York markets are open. That time is about 8 AM to 9 PM GMT. In addition, the ideal trading time of the EURUSD pair is from 13:00 to 16:00 GMT. This is the time when the london and New York markets are open.

The markets of London and New York are open at the same time. As a result, the trading volume will be aggregated by the two largest markets in the world and will become the time of day with the highest volume. This means that the EURUSD pair will be trading more actively during this period, and this is the best time for traders to look for opportunities.

Conclusion: MEANING OF EURUSD

Above is some basic information to learn the meaning of EURUSD. We hope that, with this information, traders can easily access and gain initial experience to practice trading and make profits from EURUSD.

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