Features of Major Currencies
For currency pairs, for example EUR/USD and USD/GBP, some of them are more volatile and some of them are less volatile. If you understand the features of currency pairs, you will be able to know how to choose an appropriate asset when you trade binary options and you will have a greater chance to make a profit.
The binary options brokers usually offer a wide array of assets for traders to trade with. For traders who are not good at conducting exchange market price analysis, it is recommended that they place trades with the most traded major currency pairs at first. Then, these traders can trade with the less traded minor currency pairs when they gain some experiences and understand the features of currency pairs.
Here we briefly describe the features of major currencies. For novice traders and for those who do not know how to select a currency pair, it would be better for them to learn and understand the features of every currency.
Characteristics of US Dollar
The US dollar is the world’s largest reserve currency. In binary options trading, the most commonly traded currency pairs are those paired with the US dollar. If a trader does not know about this characteristic, it will put him at a disadvantage. The movement of the US dollar is influenced by a number of factors, such as credibility, politics, and economic growth. When the economic indicators are released, the markets sometimes become volatile.
The economic indicators and statistics are released regularly. The US dollar tends to fluctuate at the time when economic indicators are published. When you trade with US dollar, you should pay attention to the following economic indicators:
- Non-farm Payrolls
- Unemployment Rate
- Gross Domestic Product (GDP)
- FOMC (Federal Open Market Committee) Statement
※Other economic indicators that have an impact on the US dollar can be found here.
・Historical data for the US dollar
・How different the price movement is from the predictions made by financial institutions?
Prediction of Market Trends
・When the economic indicators are released, if it is different from the prediction made by financial institutions, the market tends to move in opposite directions.
The FRB releases are especially important and it has attracted the attention of traders from all over the world. It is strongly recommended to pay attention to these indicators so as to make your trading experience as smooth and effective as possible.
Characteristics of British Pound Sterling
The British pound sterling is the most volatile currency among the major currencies. It was once the world’s largest reserve currency. Compared with the US dollar, the British pound sterling is less traded due to sluggish economic growth. Since the British pound sterling is volatile, it is recommended for experienced binary options traders instead of novice traders.
The British pound sterling is still popular among individual investors. Currently, there are many individual investors in the United Kingdom which has a large financial services industry. Investors in the UK also tend to trade the British pound sterling. That is to say, when you trade binary options, you should take notice of the activities of individual investors. Specifically, you should keep a close eye on the individual investors and learn how they obtain the market information and when they place trades.
The movement of British pound sterling has a strong influence on individual investors. What indicators an individual investor should look at? Below are all relevant indicators to consider:
- High Yield Bond
- Nationwide House Price Index
- Purchasing Managers Index (PMI)
- BOE Monetary Policy
- MPC Meeting Minutes
※Other economic indicators that have an impact on the British pound sterling can be found here.
It is difficult to know exactly how individual investors perform. It will be enough to look at the information as a guide. As a practical method, it would be better to look at the chart to predict how individual investors act.
Characteristics of the Euro
The euro is the world’s second largest reserve currency and its history is not long. The economic conditions of the developed countries have an influence on the movement of the euro. Thus, its movement is relatively easy to predict. The euro is popular among traders, including novice traders and experienced traders.
The euro is a stable currency in the foreign exchange market and this is an advantage. Recently, it is influenced by political factors. The euro is used by 17 countries and all these countries will have to share risks and profits.
The euro was created without a strong governance mechanism as government. Countries have the authority to make fiscal policy. Thus, a trader also has to keep an eye on all the member states. The euro tends to be influenced by the economic indicators released by countries with a strong economy such as Germany and France. Below are the main economic indicators to consider:
- Unemployment Rate in Germany and France
- ECB (European Central Bank) Monetary Policy
- ECB Minutes
- Eurozone Retail Sales
- Ifo Business Climate Index
- ZEW Indicator of Economic Sentiment
It is the same as US employment data; many financial institutions make a forecast of the movement of the euro. When the economic indicators are released, it is recommended that you take a look at how different the price movement is from the predictions made by financial institutions. Then, you can make a judgment based on your observations. The euro is considered as a currency that is relatively easy to predict its movement and it is popular among binary options traders. For novice traders, it would better to start trading binary options with the euro.