Giles Coghlan LLB, Lth, MA
Financial Source
The USD is the currency that all others revolve around. Understanding that is a key concept to grasp early on in your trading experience. The moves in the major pairs over the last few weeks have mainly been dollar-driven. Specifically, it has been a weaker dollar on the huge stimulus measures out of the US and the virtually unlimited QE programme. All this has resulted in the present dollar weakness which has been driving the major pairs higher. So, here are a couple of practical applications to take away and apply to your trading.
Firstly, when you are trading major pairs, always look at the US dollar Index. The overall USD strength or weakness will help show you the near term expected direction in the major pairs. Here is a setup below that you can use. The Dollar Index is in the bottom right of the charts and all the majors are visible at a glance. It is helpful to lay out the major pairs alongside the Dollar Index like this:
Secondly, whenever you are trading the EURUSD remember that the DXY and EURUSD always move in the opposite direction. DXY up, EURUSD down. EURUSD up, DXY down. This is why the Dollar Index is also known as the 'anti-EURUSD index'. (check out the below chart - DXY orange line, the candlestick chart is the EURUSD). So, this means that you never want to be trading the EURUSD higher if the DXY is moving higher and vice versa.
Grasping the USD focus of the FX world is extremely important to understand. You can use this lesson to improve your handling of the major pairs and in particular the EURUSD pair.
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Editors’ Picks
EUR/USD looks for higher ground above 1.06
EUR/USD chewed through chart paper between 1.0550 and 1.0600 levels on Tuesday, testing into the low side but staging a recovery to add a thin 0.14% on the day.
GBP/USD churns below 1.27 ahead of UK CPI inflation print
GBP/USD churned chart paper just south of 1.2700 on Tuesday as Cable traders brace for a decently-sized UK data dump due on Wednesday, headlined by UK Consumer Price Index (CPI) inflation figures for October.
USD/JPY pares gains below 155.00 amid risk-off mood
USD/JPY is paring back gains below 155.00 in Wednesday's Asian session. A broadly softer US Dollar, a risk-off market mood and looming Japanese intervention risks limit the pair's upside. Mounting Russia-Ukraine tensions weigh on risk appetite, lending support to the safe-haven Japanese Yen.
Editors’ Picks
AUD/USD turns south toward 0.6500 as US Dollar finds fresh demand
AUD/USD hs turned south toward 0.6500 in Asian trading on Wednesday. The pair lacks bullish conviction after the PBOC left the Lona Prime Rates unchanged. Escalating Russia-Ukraine geopolitical tensions and renewed US Dollar demand keep the Aussie on the edge ahead of Fedspeak.
USD/JPY pares gains below 155.00 amid risk-off mood
USD/JPY is paring back gains below 155.00 in Wednesday's Asian session. A broadly softer US Dollar, a risk-off market mood and looming Japanese intervention risks limit the pair's upside. Mounting Russia-Ukraine tensions weigh on risk appetite, lending support to the safe-haven Japanese Yen.
Gold advances to over one-week high on rising geopolitical risks
Gold price (XAU/USD) attracts some follow-through buying for the third consecutive day on Wednesday and climbs to a one-and-half-week high, around the $2,641-2,642 region during the Asian session.
UK CPI set to rise above BoE target in October, core inflation to remain high
The United Kingdom’s (UK) Consumer Price Index (CPI) data for October will be published by the Office for National Statistics (ONS) on Wednesday at 07:00 GMT.
How could Trump’s Treasury Secretary selection influence Bitcoin?
Bitcoin remained upbeat above $91,000 on Tuesday, with Trump’s cabinet appointments in focus and after MicroStrategy purchases being more tokens.
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