In the forex market currency trading is always done in currency pairs, such
as EUR/USD (or USD/JPY). Accordingly all trades result in the simultaneous
buying of one currency and the selling of another. The base currency is the
"basis" for the buy or the sell. It is useful to consider the currency pair
as an instrument, which can be bought or sold. Some of the major pairs
are discussed below:
EUR/USD
If for example you think the US stock market will continue to fall and
that will hurt the USD, you click on BUY, you are buying Euros expecting them
to go up against the USD. If you click on Sell you buy US Dollars expecting
them to climb against the Euro.
USD/JPY
If for example you think that the Japanese government is going to weaken
the Yen in order to help their export industry, you would click on BUY,
expecting the US Dollar to increase in value against the Yen. If you think
that Japanese investors are pulling money out of US financial markets and
repatriating funds back to Japan you would click on SELL, expecting the Yen
to strengthen against the US Dollar as Japanese investors sell their assets
and convert their dollars to Yen.
GBP/USD
If for example you think the British Economy will continue to be the
leading economy amongst the G7 nations in terms of growth thus buoying the
Pound, you would click BUY, expecting the British Pound to strengthen against
the US Dollar. If you believe the British are about to commit themselves to
adopting the Euro, you would click SELL, expecting the Pound to weaken
against the Dollar as the British devalue their currency in anticipation of
merging with the Euro.
USD/CHF
If for example you think the Swiss Franc is overvalued and that the US
economy will recover quickly, you would click BUY, expecting the US Dollar to
strengthen against the Swiss Franc. If you believe that due to instability in
the middle east and in US Financial Markets the Dollar will continue to
weaken, you would click SELL, expecting the Swiss Franc to strengthen against
the Dollar.
EUR/CHF
If for example you think the Swiss government wishes to devalue the
currency to help exports in Europe, you would click BUY, expecting the Euro
to increase in value against the Swiss Franc. If inflation started taking off
in Germany and France, you would click SELL expecting the Swiss Franc to
increase in value against a devalued Euro.
AUD/USD
If for example you think that commodity prices are going to rise
dramatically thus benefiting the AUD, you would click BUY, expecting the
Aussie to strengthen against the US Dollar due to Australia being a leading
exporter of many commodities. If you believe that Australia is heading into
recession, you would click SELL, expecting the US Dollar to strengthen
against the AUD.
USD/CAD
If for example you think that the US economy is going to rebound while the
Canadian economy goes into recession, you would click BUY, expecting the US
Dollar to strengthen against the Canadian Dollar. If you believe the Canadian
Dollar is fundamentally undervalued and will strengthen against the US
Dollar, you would click SELL, expecting the CAD to rise against the US
Dollar.
NZD/USD
If for example you think the success of Lord of the Rings will cause
tourists to flock to New Zealand and pump money into the local economy, you
would click BUY, expecting the NZD to strengthen in value against the US
Dollar. If you expect the AUD is going to fall, along with commodity prices,
you would click SELL expecting the NZD to drop in value against the US
Dollar.
EUR/GBP
If for example you believe the British are about to commit themselves to
adopting the Euro, you would click BUY, expecting the Pound to weaken against
the Euro as the British devalue their currency in anticipation of the merger.
If you believe that Great Britain's economy will grow at a faster rate than
Europe's, you would click SELL, expecting the British Pound to rise in value
against the Euro.
EUR/JPY
If for example you believe that the Japanese banking crisis will continue
to get worse, you would click BUY expecting the Euro to rise against the Yen.
If for example you believe that Europe is going into recession thus weakening
the Euro, you would click SELL, expecting the Euro to drop in value against
the Yen.
GBP/JPY
If for example you believe that the BOE is going to raise interest rates,
you would click BUY, expecting the British Pound to increase against the Yen
due to interest rate arbitrage. If you think the Nikkei index will rise at a
higher rate than the FTSE thus buoying the Yen, you would click on SELL,
expecting the Yen to increase against the British Pound.
CHF/JPY
If for example you believe conflict in the Middle East may cause a spike
in oil prices, you would click BUY, expecting the CHF to increase against the
Yen due to Japan's reliance on imported oil and the CHF's safe haven status.
If you believe there will be more stability in the region, you would click
SELL, expecting the Yen to rise against the CHF.
GBP/CHF
If for example you believe that the BOE is going to raise interest rates,
you would click BUY, expecting the British Pound to increase against the CHF
due to interest rate arbitrage. If you believe the British are about to
commit themselves to adopting the Euro, you would click SELL, expecting the
Pound to weaken against the CHF as the British devalue their currency in
anticipation of merging with the Euro.
EUR/AUD
If you believe that Australia is heading into recession, you would click
BUY, expecting the Euro to strengthen against the AUD. If for you think that
commodity prices are going to rise dramatically, you would click SELL,
expecting the Aussie to strengthen against the Euro due to Australia being a
leading exporter of many commodities.
EUR/CAD
If for example you think that the German economy is going to rebound while
the Canadian economy goes into recession, you would click BUY, expecting the
Euro to strengthen against the Canadian Dollar. If you believe the German
economy will go into recession and drag the Euro down with it, you would
click SELL, expecting the Canadian Dollar to rise against the Euro.
AUD/CAD
If for example you think that the Australian economy is going to grow
while the Canadian economy goes into recession, you would click BUY,
expecting the AUD to strengthen against the Canadian Dollar. If you believe
the Australian economy will go into recession, you would click SELL expecting
the Canadian Dollar to rise against the AUD.
AUD/JPY
If for example you think that the Australian economy is going to grow
while the Japanese economy goes into recession, you would click BUY,
expecting the AUD to strengthen against the Yen. If you believe the
Australian economy will go into recession due to falling commodity prices,
you would click SELL, expecting the Yen to rise against the AUD. |
