Understanding EUR/USD, the most popular currency pair in forex market. When you learn Forex currency pairs, there is no doubt that you will want to know which currency pair is the most popular among so many available in the Forex market. Every trader who has been in the market for years must have known that the Euro to US Dollar currency pair is one of the most traded in the world of foreign exchange.
What to Know about the EUR/USD Pair
Representing the two biggest world’s economy trendsetter, the EUR and USD are highly considered in the Forex market. Considering how important this currency pair in the Forex market is, it must be great for you to learn more about this currency pair. In this article, we are going to discuss everything you shouldn’t miss about the EUR/USD currency pair.
#1 A Brief History of the EUR/USD Pair
Let’s begin from a brief history of this currency pair. As we know, Euro came to play in 1999 in the aim to assist the stability of European exchange rate. Earlier of its existence, the Euro and Dollar exchange rate is 1.1686. In its initial days, Euro had been considered as the contender the unofficial title of US Dollar as the world reserve currency.
Nowadays, EUR/USD is known as a popular and most traded currency pair in the Forex market. The two currency units on this pair are also considered as worldwide most liquid pair. This characteristic has made a big influence to the popularity of each currency unit and this EUR/USD pair. In addition to its high liquidity, the volatility of this pair is also high.
#2 What Has Affected the EUR/USD Pair?
Well, there are actually a lot of factors which can influence the EUR/USD exchange rate. Basically, the factors are those which influence the currency rates in general. However, there are two essential factors that have an effect to this pair: monetary policy implemented by central bank and the underlying economy’s strength. Look at the history of this pair exchange rate to see clear examples.
In this case, let’s go back to the global financial crisis which started in 2007. This year can be considered as the starting point of the biggest reductions in the history of EUR/USD. The pressures placed by this issue on world’s economy obliged a sequence of exceptional responses from the central banks. It made such a big effect toward the exchange rate of this pair.
#3 Other Facts about EUR/USD
The fact about the European Union and the United States as the two biggest economic powers in this planet is undeniable. The US dollar is highly recognized as the global most greatly traded and most extensively held currency. Then, the Euro as European Union currency is recognized as the second most well-liked currency around the world. That’s why it creates most actively traded pair.
Moreover, the combination of high volatility and liquidity develops the EUR/USD pair as a recommended currency pair to trade for Forex beginners. Nevertheless, it is important to keep in mind that trading this currency pair must be followed by a good risk management too. This is because a pair that offers high chance of profit may offer high opportunity of loss as well.
A Final Word on EUR/USD Pair
In conclusion, it is highly recommended for Forex traders to learn more about the EUR/USD pair in case of its position as one of the most popular pair in the Forex market. This currency pair may have such complex history, but it remains to be well-liked pair that has been traded by a lot of Forex traders. Therefore, don’t hesitate to learn Forex further.