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Thursday 13 February 2014

Trading the EUR crosses

Outside of EUR/JPY, EUR cross action tends to be concentrated in EUR/GBP and EUR/CHF, where the cross direction is largely determined by changing outlooks between the Eurozone economy relative to the UK and Swiss economies. Reactions to Eurozone and Swiss news or data are most likely to be felt in the EUR crosses as opposed to EUR/USD or USD/CHF, whereas UK news/data is going to explode all over GBP/USD and EUR/GBP.

Sharp USD-driven moves will also affect these crosses, with the brunt of the USD move being felt in GBP/USD and USD/CHF, frequently biasing those legs to drive their EUR cross in the short run. That means frequently (but not always) that a sharp move higher in the USD will tend to see a higher EUR/CHF and EUR/GBP, while a rapid USD move lower will tend to see lower EUR/CHF and EUR/GBP.

The pip values of these EUR crosses will be denominated in either GBP or CHF, with GBP significantly more expensive on a pip basis than CHF. Typical daily ranges in the EUR crosses are relatively small on a pip basis - roughly 20 to 40 pips on average, but they’re still substantial on a pip-value basis and roughly equivalent to daily EUR/USD ranges. 


 

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