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A Guide to Trading EURUSD

EUR/USD is the currency pair which matches the exchange rate of euro (EUR) against the US dollar (USD). Traders can trade EUR/USD using financial derivatives like contract-for-differences (CFDs). They can also buy or sell the physical currency.  In terms of trading, the euro is the base currency and the US dollar is the quote currency. This means the EUR/USD price refers to the amount of dollars that one euro can buy at any time. For example, if the market price is currently 1.10, it takes $1.10 to buy €1.  

Regarding the forex market: 

As a result, trading in EUR/USD accounts for 22.7% of the total forex market turnover according to the April 2022 BIS Survey.  As a guide, the next most traded pair is USD/JPY which has 13.5% of the total volume.

EURUSD History

Before the birth of the eurozone and its own currency, there were several attempts to initially create a joint European economy. The European Economic Community (EEC) was established in 1957 to create the free movement of people, goods, and services across the borders of six countries. This economic integration led to the formation of the European Community (EC) in 1993 which was eventually the forerunner to the EU.  

Meanwhile, policymakers founded the European Monetary System (EMS) in 1979. This was an adjustable exchange rate mechanism which promoted monetary policy stability throughout the continent by reducing major exchange rate fluctuations between competing European Community members. The Maastricht treaty in 1992 took over from this arrangement with plans to set up one single currency. This remained in place until 1999 when it was replaced by the European Economic and Monetary Union (EMU).  

EMU ultimately led to the creation of the euro which was introduced on 1 January 1999. This seminal date saw national currencies like the French Franc and German Deutschmark, which had competed against the US Dollar individually, disappear as the euro launched in digital form. But the trading of EUR/USD didn’t kick off until 2002 when the first twelve European Union countries officially adopted the euro and the legacy, national currencies were folded into the new, physical single currency. 

Why Trade EURUSD?

EUR/USD accounts for nearly one in four forex transactions. This means it has the largest global trading volume and is the most popular currency pair in the world [9]. Four reasons to trade EUR/USD are: 

Analyzing EURUSD Market Trends

Even though the idea of a single European currency has been around for decades, EUR/USD is a relatively new currency pair to trade, when you consider its history as compared to GBP/USD.  But after the euro’s inception into physical tender in 2002, EUR/USD quickly gained status as the foremost currency pair in terms of volume, liquidity, and spreads.  

By pairing the currency of two global economies, the EUR/USD has inevitably been impacted by all major financial events throughout its relatively short history. Over the last 15 years, there have arguably been three standout moments in history: 

How To Trade EURUSD

Being a mix of two major global economies means EUR/USD is driven by a multitude of different factors. Five of the most important include: 

EUR/USD Trading Strategies 

There are many trading strategies to choose from when buying and selling EUR/USD. Often the most feasible ones will depend on your trading style and personality, and are drawn from either fundamental or technical analysis, or a combination of the two. 

Specific Trading Strategies for EUR/USD 

Discover which trading strategy is best for you by gaining a better understanding of position trading vs. swing trading here. 

Final Thoughts 

EUR/USD is the most popular currency pair in the world. Its liquidity and narrow spreads mean it is highly attractive to all types of traders. Both fundamental and technical analysis can be used to enter and exit positions. The pair is heavily influenced by global factors which often grab the news headlines.  

Using a defined trading strategy in EUR/USD allows you to be consistent, control your emotions and manage your risk. These elements are key to long-term success when trading EUR/USD.  


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