Traders should be aware of the fact that the US dollar is observed in most currency pairs, as long as it’s a global currency. Such a matter of things appeared in 1944 after signing the Breton Woods Agreement.
One more thing is that the economy of the US is an advanced one and influences other governments. Direct trading partners of the USA feel this the most.
That’s why traders have to look for the pairs able to replace the dollar when the discount rate is instable or when there are issues with the American trade expansion.
The best option in this situation is to choose the EUR/JPY pair. The changes of a dollar do not influence it. Moreover, both currencies are looked at as temporary finance storage.
Fluctuations of EUR/JPY have something to deal with the economic indicators of Europe and the financial policy of Japan. Besides, the yen of Japan can be influenced by the data of the stock market.
The Euro correlates with what’s going on in Europe (meaning economy) and news releases. All the events connected with Eurozone matter, including social life (which means that even terrorist acts can influence the rate).
The pair correlation is affected by the conclusions made within the meeting of ECB or the European Central Bank. They hold these meetings eight times a year. After the event, the ECB’s main representatives organize a press conference where they state the aim and the results of their negotiations.
Traders can find this data more relevant than a discount rate because such statements show the issues the ECB has faced or will face in the future.
Don’t forget about the PMI index. They give info on it once a month. It is used to demonstrate the actual condition of the services market. The ECB takes this data to decide on the interest rate.
In the case of Japan, everything is somewhat predictable. Here we mean press conferences and news releases, meetings of the Bank of Japan.
The Central Bank plays a significant role in every country as long as it distinguishes the main economic direction. As for Japan, we shouldn’t forget about the national bank’s position, mainly meaning obtaining government bonds.
The quantitative easing program launched by the Bank of Japan is the top one worldwide, that’s why any info on this topic will influence the yen.
Regular economic events, like GDP growth, CPI, and the Tankan index also have a severe impact on the EUR/JPY cross rate.
In Japan, the relationship between the discount rates and rising prices are rather typical. So, when inflation grows, the interest rate will jump. The situation with falls is the same one.
Besides, traders should realize that Japan isn’t a big country; there are no energy resources and mineral resources. The yen’s price directly correlates with the condition of the product market.
The Japanese economy can boost the export of cars and hi-tech. In this relation, the US is its leading partner. Turnover fall is going to lower the figure of the yen.
Even though there are many things to consider, trading on EUR/JPY isn’t hard. The news releases are significant, but due to the high correlation of currencies, the technical analysis can be applied.
Because of low variability, high liquidity, and quite a simple process, the beginners can practice trading this pair. It’s easy to make a profit on it; that’s why it’s a sage idea at least to try trading with this pair.