On Tuesday, EUR/USD moved sideways within a narrow range around 1.1550. The other reason was that all market participants were awaiting the key U.S. economic data releases. The duo was under intense pressure as the US Dollar mounted a remarkable comeback. Whether or not this was an intended consequence, this shift has changed trading behavior for all currency pairs. Despite fears of a meltdown, the euro area has proven more resilient than many expected this summer. Yet it is not quite that simple, as Federal Reserve expectations and forthcoming Bank of England announcements are continuing to drive market volatility.
The euro area economy is turning out to be surprisingly resilient. Recent catalysts, such as the EU-US trade agreement and Germany’s commitment to higher spending plans, are fueling this expansion. This positive backdrop has provided some buoyancy to the euro, but concerns surrounding the potential for a decrease in the Federal Reserve’s interest rates in September have restricted the Greenback’s strength. As a result, EUR/USD has consistently struggled to break up through strong resistance.
Economic Influences on EUR/USD
EUR/USD has fundamentally lost its upward momentum, as a new set of economic realities have altered its course. The euro area outlook is brighter than it has been in years. It’s heavily dependent on booming consumer spending and investment, driven by boom government stimulus. Conversely, the dark clouds of uncertainty hanging over the Federal Reserve’s future monetary policy makes it difficult for the US Dollar.
The expected ISM Services PMI numbers for July are likely to be the biggest influence on which way the market will swing. Almost every economist you read expects services sector growth to continue. If their actual results align with their projections, this might further increase the dollar’s value. Even the slightest miss from what is expected can result in major shifts across currency pairs, like EUR/USD.
Moreover, analysts note that the European Central Bank (ECB) has signaled that it may not pursue further cuts to interest rates, which could stabilize the euro in the short term. This uncertain economic picture leaves traders on their toes, since both central banks’ actions are poised to have an outsized influence on market direction.
Market Behavior and Trading Conditions
While traders make decisions based on the interpretation of these economic reports, they should consider the greater market conditions that may impact trade execution. Quick market order execution is of utmost importance for traders who seek to trade EUR/USD in bulk quantities. As an illustration, if you order 10,000 shares of EUR/USD via market order, your execution prices will differ as the market shifts. Maybe you’re receiving 2,500 shares at one valuation and 7,500 shares at another.
Traders need to understand that extreme volatility can skew real-time price quotes for EUR/USD. These prices may not always reflect the actual market trading environment. We know brokers to be indispensable partners in the trading space. They offer very solid platforms, with nice spreads and powerful tools to help execute your trades in an efficient manner.
For one, the interconnectedness between all the different currency pairs is impressive. For instance, GBP/USD and EUR/USD tend to move the same direction in reaction to similar economic releases. This relationship signals that when you play forex trading strategies in multiple currencies, you need to be paying attention to a variety of currencies.