In the currency market there are some currencies that have more importance than others. We already know that in current times, the value that we give to a currency is based on the trust that we have on the government printing that currency.
February 13, 2014 (Newswire) - In the currency market there are some currencies that have more importance than others. We already know that in current times, the value that we give to a currency is based on the trust that we have on the government printing that currency. This is one of the reasons one currency may be more appreciated than another one. In the case of the EUR/USD pair, this is the most traded pair in the Forex market, because it has the two main currencies in the world.
The United States Dollar or the USD is the main reserve currency in the world. Central and commercial banks around the world hold a larger percentage of US Dollars in their reserves than any other currency. This is because the US Dollar is backed by the goodwill and good faith of the Federal Reserve of the United States. This part is very important to understand why the EUR/USD pair is the most traded pair in the Forex market, explained the experts at the Binary Options Broker Optionova (http://www.optionova.com).
The second part of this equation is that the Euro, which is the single currency for the Euro Zone, a region that put together holds the second largest economy in the world. Therefore, it is no surprise that the Euro is the second reserve currency preferred by banks and financial institutions.
The analysts of the online magazine, Masterforex-V World Academy (http://www.masterforex-v.com) joined the team at the Binary Options Broker Optionova to determine the potential movements that the EUR/USD may have in the medium term. The experts started by pointing out that until recently, the EUR/USD was rallying in a steady uptrend. This meant that the Euro was gaining strength versus the Dollar. But this trend has been changing recently. There are fundamental reasons for this change in direction from both sides of the pond; the U.S. and Europe.
The recent economic data coming out of the U.S. has been positive for U.S. stocks and for the Dollar. The unemployment rate has been dropping steadily while the work participation has been rising. Even though, job creation has had its up and downs, the Non-Farm Payrolls number keeps coming out in positive territory, meaning that jobs are still being created regardless of the pace. Energy prices keep rising, as noted by the analysts at the Binary Options Broker Optionova and this has caused an increase in inflation. The experts at the Masterforex-V World Academy also added that the markets are very cautious, because they would like to see that the Federal Reserve is going to keeps its economic stimulus for a prolonged period of time.
Let us take a look at more exact levels for the EUR/USD where we may be presented with opportunities to enter this pair. The analysts of the Binary Options Broker Optionova point out to the 1.3700 as one of the most important levels on this instrument. They also mention a down sloping channel covering the area of the 1.3894 level to the 1.3700. Therefore, keep a close eye on that 1.3700 level, which is also a psychological round number.
There is also an uptrending channel at lower levels from the 1.3295 to the 1.3550 zone, which in case of a correction, we may see a visit to the lower targets mentioned next. First we have the 1.3548 level which is part of a Fractal retracement, pretty much like the stair step price action movement. There is also a 62% retracement to the 1.3524, a 76% retracement to the 1.3436 and an 88% retracement to the 1.3366.
Another possible scenario is that the Euro strengthens versus the Dollar and the pair goes back to its original uptrend. This will take us to some targets to the upside, breaking the uptrending channel to above the 1.3895 level. Other possible bullish targets can be the 1.3722, with a 50% retracement, or 62% retracement to the 1.3762, 76% to the 1.3813, and 88% retracement to the 1.3852.
Besides the technical tools that we use to calculate the possible targets for the EUR/USD, we can also use correlations between markets to see which of the two currencies is bound to beat the other one, because remember that when we analyze a currency pair, we must take into consideration the economic factors affecting both regions or countries representing each currency.
Having said that, the traders of the Binary Options Broker Optionova agree that a great tool to incorporate into our analysis of the EUR/USD is the Dollar Index. The Dollar Index or the DXY is a measurement of how strong or weak is the Dollar versus a group or basket of currencies. This basket is composed of the main currencies around the world.
In conclusion, the Binary Options Broker Optionova's experts along with the analysts and staff members at the Masterforex-V World Academy expect more weakness for the Euro versus the Dollar, as long as the FED keeps tapering its asset purchasing program.