The Euro and the Dollar are two of the leading and most well known currencies in the world. The Euro vs the Dollar (EUR/D) rate are the world’s largest traded currency pair, with a daily volume averaging $1.7 trillion. While these facts alone might indicate that the Euro may have the edge when trading major international currencies, some forex traders argue that the differences between the two remain largely unexplained.
Traders say that the similarities between the euro dollar and the euro are superficial at best. For example, the EUR/USD is highly correlated with the US Dollar. While this may appear to be a good thing, there are a number of reasons why traders see the correlation as negative. One of these reasons is that the correlation is negative when compared to the traded currency pairs of the United States and Canada. The US Dollar is significantly stronger than the Euro, which makes the euro looks like it would lose value quickly against the dollar.
More specifically, there are three long-term trends that traders believe are negative for the euro pair: long-term downward trend, short-term price movement, and Euro exchange rate versus the dollar. It is important to remember that these are estimates and trends, not predictions. As they say, “the proof is in the pudding,” so to speak.
Traders who favor the euro (at least the long-term view) say that the Euro will likely lose value against the dollar over the next few years. If this happens, the euro would become a weaker link in the international monetary network, and it would become even more difficult to trade or invest in the European economy. This view is mostly influenced by weak consumer sentiment in Europe, worries about the euro getting stronger (which it may do), and slower growth in peripheral European countries like Portugal and Ireland. If you own the EUR/USD (or the EUR/CHF), this might be a bad investment.
Forex traders say that there is a current trend that favors the EUR/USD. The EUR/CHF has been on a strong upward trend, which might continue, especially with the recent announcement of stimulus programs from the European Central Bank and other sources. The daily chart of this pair of currencies shows an uptrend since mid-January, although there are times that the trend reverses. In the present time, traders are saying that the EUR/USD is on the upswing. The support level for this currency is currently around the $1.01 mark, which is also the highest for this particular pair on record.
The EUR/CHF has the lowest volatility of all the currency pairs tracked by brokers. It has been somewhat volatile recently, but there is no obvious common pattern that can be drawn to explain this. There is, however, a general feeling among forex traders that this is a low risk high reward opportunity. The low volatility and short history of this pair of currencies make it easier to enter into trades with smaller amounts of risk, which makes it attractive to small traders or beginners. This is the best time to buy if you are a new trader, since this is when the price of the pair is at its lowest.
The EUR/CHF has been on a downward trend for the last two months. One of the possible reasons for this is that China, the European Union’s largest trading partner, might begin to increase trade surpluses which will increase demand for the euro in the European market. Another reason is that the Central Bank of India, which controls the exchange rate, is expected to cut the base interest rates that are currently scheduled to start in late 2021. This would reduce the exchange rate to make the EUR/CHF more attractive to traders. Finally, some analysts think that the end of the first world war may have a significant effect on the trends in this economic model.
Since there are only three major currency pairs in Europe, it is difficult to get a true picture of how the exchange rates of these currencies change due to external factors. It is, however, safe to say that the euro is far from being at risk of losing ground to either the USD or the GBP. In fact, it is probably fair to say that this model is far more bullish than most models for predicting the direction of these currencies. If you want to trade the EUR/CHF pairs, you may want to start trading them using a demo account before risking your actual money.