The EUR/USD currency pair is our most popular financial asset as well as online share trading. It is highly liquid and is regularly discussed on specialized resources. Despite a large number of analytical materials, it is pretty tricky to predict the price movement of the chart.
The quote is influenced by many factors that must be considered when creating your analytical forecast.
Today’s article will give helpful recommendations for making money on a highly liquid financial instrument and discuss price dynamics and experts’ opinions about EUR/USD. A long-term forecast will help you correctly place trading orders, assess the current situation, and make money on it, Exness analysts are sure.
What Is Happening on the World Stage: The Position of the EUR/USD Currency Pair
The latest macroeconomic data shows an apparent decline. Countries united by a single bloc have suffered from the consequences of quarantine. The slow spread of the vaccine still holds back the recovery of the European economy.
Germany is considered the most developed country in Europe. In the first quarter of this year, its growth rate decreased by 1.7%. At the same time, Italy showed a fall of up to 1.8%, notes Exness. Despite this slowdown, the macroeconomic data of the Eurozone turned out to be better than expected.
Compared to Europe, America is in a better position. Although there is a gradual recovery from the crisis, there is still a considerable gap between these large economies. Until the European Union improves its financial situation and takes urgent measures, strengthening the US dollar will contribute to the fall of the EUR/USD pair.
Recently, macroeconomic news came out that showed a pandemic maximum. At the same time, the consumer confidence index during the conference last week reached the February 2020 level.
To make a high-quality analytical forecast, a trader needs to consider all the news regarding the economic state of the United States or Europe. According to Exness analysts, official proposals for recovery measures will play a unique role in shaping the EUR/USD rate. The government may artificially increase liquidity, leading to a rapid increase in US Treasury yields.
What Factors Affect the Value of EUR/USD?
To predict the movement of quotes of this currency pair, it is necessary to study the current state of the two economies and compare them. The base currency for this instrument is the European euro, the official currency of the European Union.
Member countries often use the EUR for domestic trading. They buy and sell goods for the common currency, which significantly simplifies the turnover.
The high liquidity of the euro is ensured by active internal trade between the European Union member states. This currency is in great demand. It is quickly sold or bought on the international market. Its cost directly depends on the state of the EU.
The release of new macroeconomic data can have both a positive and a negative impact on the position of the European Union.
A trader can make a correct forecast for a currency pair if he monitors the key fundamental factors of EUR/USD. The analytics of this tool is no different from other products of the Forex market. The exchange rate movement directly depends on the interest rates of central banks and economic incentives that pressure a particular country.
The trader is advised to pay special attention to the gross domestic product growth, production volumes, the unemployment rate, and the dynamics of changes in consumer prices. All these factors will help to indicate the price movement for the EUR/USD pair.
The chart will show a decline or growth depending on the psychological mood of the market players. If investors are risk-averse, the US dollar will fall in price. The US national currency rises in price when the world market participants plan to conduct calm and balanced trades.
The investor must take into account the political situation on the world stage. Severe disagreements between the member countries of the eurozone may hurt the dynamics of the euro. Fierce negotiations between the EU and the UK have become one of the reasons for the fall of the euro-dollar currency pair.
EUR/USD Price Movement Analysis
Considering market trends since March last year, we can note a gradual increase in euro-dollar quotations. In the second half of 2021, the financial instrument rose from $1.08 to $1.23 per euro, reminds Exness.
The American currency showed a fall against a basket of reserve currencies. Low-interest rates and fiscal stimulus from the Federal Reserve contributed to the depreciation of the national currency.
At that time, investors were waiting for the revival of financial markets and preferred high-risk assets. Amid the hype, the US currency has lost its former value. It is a reliable protective tool that cannot bring significant profits.
At the end of December 2021, the US dollar grew due to the high yield of treasury bonds. The first quarter of 2022 marked a more significant fall in the EUR/USD quotes. Online charts showed the exchange rate falling to 1.17 dollars for one euro.
In March of this year, the Federal Reserve System representatives spoke about the potential strengthening of inflationary processes, but only in the short term.
The European Central Bank plans to limit the growth of interest rates on long-term obligations. The regulator continues introducing fiscal incentives to improve the current economic situation.
Forecast from Exness Analysts: What Will Happen to the EUR/USD Quote?
Analysts said that April was a good month despite the EU’s fierce fight against the pandemic. The third wave of COVID has become a severe problem for the EU countries, but far-sighted investors are already using information about the accelerated vaccination process in Europe.
Official plans to distribute the vaccine to the public give hope to long-term market players. Prominent investors are betting on the development of the European economy after the final victory over the coronavirus.
The decline of the euro is limited due to the maintenance of interest rates, and therefore we can conclude that the dynamics of the EUR/USD exchange rate are favorable. The online forecast is published on many economic portals.
How to Trade the EUR/USD Pair?
If a trader plans to make money on a popular financial instrument, he must choose his best option.
The EUR/USD pair can be traded in two ways:
- Through a broker that provides free access to the global Forex market (exness broker offers a wide range of trading instruments).
- Using futures and options. This option is better suited for professionals because derivative instruments provide for their pricing features. You can find various futures and options contracts on the American and European exchanges.
To ensure regular earnings on EUR/USD, it is necessary to conduct fundamental and technical analysis, to search for optimal entry points. An essential advantage of this asset is its versatility.
A trader can use almost any behavior strategy when making an analytical forecast. This opens up wide opportunities, including the automation of exchange trading.
When choosing the best moment to make transactions, it is recommended to pay attention to the current level of liquidity. Trading on the EUR/USD pair is carried out almost hourly, so the trader is not limited to a narrow time interval.