The Euro Shows Disappointing Performance In Forex Trading

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Euro Performance In Forex Trading

According to recent EU Forex trading numbers, the euro has been taking some losses against its main competitors in the currency markets. This disappointing news is coming on the heels of less-than-stellar retail sales performances and lower order numbers for Germany-based factories. Other assets such as crude oil and the British pound are now predicted to see bear market patterns as well in the near future. In the most current EU market news, traders will want to keep a close watch on the German Industrial Production figure, which will become available at 11:00am GMT. If this number posts below predicted performance, further EU market losses are expected to follow close behind it.

Euro
Euro (Photo credit: aranjuez1404)

News on the Economy

On the other side of the pond, the US dollar saw more bull market patterns and yielded higher returns. This data surpassed that of EU retail sales and orders from German factories. Mid-day trading saw a USD/CHF increase of almost 50 pips. The GBP/USD data decreased to about 60 pips during the same trading period.

Little news has been released from the US regarding this performance, and movement of the US dollar will probably happen again as a result of the latest euro-zone trading data. Many analysts predict that this month’s indicator will be higher that last month’s, which will probably generate more risk in the market. It could also wipe out any gains the greenback made yesterday. During trading later in the week, US dollar traders will want to watch for the latest US Unemployment Claim numbers as well as figures from the trade balance. Both of these figures will likely generate further volatility in the case of the greenback.

Losses of the euro in Forex trading are attributed to EU unemployment numbers, low retail sales and disappointing factory order numbers. These losses are considered moderate against currency rivals designated safe trading havens. Compared to recent Japanese yen market performance, the common currency took a 60 pip loss to start trading as low as 114.23.

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Taking Advantage of Euro/Swiss Franc Relations in Forex

SetForget Pattern Profit

As far as Forex trading is concerned, there exists one relationship between currencies of which every Forex trader should know before actually to start trading. It is the correlation between Swiss franc and euro currency pairs – the relationship extremely strong to ignore. According to the Forex market studies, it becomes obvious that the correlation between these currency pairs may be negative 95%. It is called a contrary relationship meaning that – by and large – in case EUR/USD gains in value, USD/CHF loses value in general. The opposite is also truth.

It is generally known that during the longer periods of time, like one year, the majority of currencies traded against the US dollar have over 50% correlation. It happens since the US dollar is a leading currency included in 90% of Forex transactions. Though the strong correlation between USD/CHF and EUR/USD occurs partly thanks to the general dollar impact in the two currency pairs, the explanation why the relations are much stronger than in other currency pairs comes from the tight links between Switzerland the Eurozone.

Switzerland borders on other Eurozone countries and, as a result, enjoys very close economic and political links with its bigger neighbors. The agreements between Switzerland and the Eurozone signed in 1972 and in addition to more than a hundred further mutual agreements that followed later enabled the free influx of Swiss citizens into the labor force of the EU as well as the slow but sure opening of the Switzerland employment market to citizens of the European Union. However, the links do not finish at this point. 60% of Swiss export is intended for the Eurozone, and 80% of imports are from the European Union.

As far as Forex trading is concerned, if EUR/USD and USD/CHF are long, two strongly offsetting positions are obtained or, on the whole, EUR/CHF. In the meantime, if one currency pair is long and another one is short, the same position is actually doubled up, albeit it can look like two different Forex trades. It is essential to realize for the suitable risk management since if something is skewed when one currency pair is short and another is long, losses can be multiplied easily.

The relations between the USD/CHF and EUR/USD decouple when there are different political or fiscal policies. For instance, if elections cause insecurity in Europe while everything is all right and stable in Switzerland, EUR/USD can decrease more in value than USD/CHF increases. On the contrary, if the Eurozone lifts interest rates assertively and Switzerland does not, EUR/USD can gain in value more than USD/CHF loses in value. On the whole, the fact that ranges of the two currencies may diverge more or less than the point difference, is the main reason why interest rate arbitrage in the Forex market applying these two currency pairs doesn’t work. The ratio of the range is measured by dividing USD/CHF range by EUR/USD range.

Provided by A. Collins who is a creator of simple forex trading system which is available on Forexeasystems. Also you can find there mt4 plugin Fx Pulse which can automatically collects Forex market information and displays it directly on the trading chart in real time.

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