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The most-traded currencies in the world are the US dollar and the Euro. EUR/USD is also the most traded currency pair. BIS is a valuable tool for assessing the size of the $6.6 trillion global interbank markets. It is important to note that non-institutional, retail, and/or individual investors do not trade directly in it. Ordinary investors deal with a Registered Foreign Exchange Dealer. Who serves as the counterparty to all of their clients’ trades. EUR/USD is a very liquid currency pair.
The Bank for International Settlements (BIS), is sometimes known as the central bankers’ bank. It surveys the worldwide foreign currency (FX) and over-the-counter (OTC) derivatives markets every three years.
The US Dollar was found to be on one side of 88 percent of all deals. With the Euro coming in second at 32 percent. According to the BIS study, EUR/USD trading accounted for over a quarter of all FX trades.
WHERE TO TRADE
Because EUR/USD trading accounts for such a substantial portion of total trading, the pair can be traded in any of the major currency centers. These include the United Kingdom, the United States, Hong Kong, Singapore, and Japan, as well as smaller centers such as Australia.
WHO TRADES
The EUR/USD market’s depth and liquidity allow many types of traders to participate. These include central banks, investment banks, commercial banks, fund managers, corporations, retail traders, and others. Retail traders find it particularly tempting since spreads may be tight, cutting the cost of buying and selling.
Some Tips
It is important to pay attention to both sides of the equation. Which is crucial when dealing with any currency combination. In the case of EUR/USD, it’s vital to keep a watch on what’s going on in both the US and the Eurozone. Which is made up of EU members that have selected the Euro as their currency.
Economic data from, Federal Reserve and European Central Bank (ECB) decisions, US and European government actions, political developments, the spread between government bond yields in the US and Germany – the Eurozone’s largest economy – and a variety of other relative factors all have an impact on it.
Furthermore, the EUR/USD is a reliable indicator of overall market mood. Because the US Dollar is often seen as the safest of safe havens for investors seeking to decrease risk. EUR/USD tends to decline when traders are pessimistic and increase when they are more prepared to consider riskier assets, despite the fact that the Euro is far from the riskiest.
To summarise, the breadth and depth of the EUR/USD market characterize it as a distinct and potentially fascinating trading environment for both new and seasoned retail traders. Although it may not be as volatile as other markets, there will be enough activity for traders to enter and exit trades.
Psychological approaches, in addition to basic and technical analysis, should be considered in any plan.
This may frequently provide the most critical data for analysis and strategy formulation, from measuring the overall market’s mood on a scale of panic to mania to calculating personal risk management.