The Euro vs. the US dollar (USD) is currently the second most traded currency pair in the global market. It is so dominant in the FX market that it is easy to overlook that less than 20 years ago, the Forex (FX) pair, did not even exist. Nowadays, FX is traded over the Internet with hundreds of brokers, all of whom offer their services on the World Wide Web. The Forex markets are highly leveraged - higher amounts of leverage can mean bigger profits in shorter time frames - and a higher amount of leverage also means higher risk. This is why the Forex trading market is a high-risk endeavour.
What makes the Eur/USD so special is that many Forex traders consider it a key player in their trading portfolio. For instance, Chris Burke of FX Club Capital believes, "The euro has become an important and essential trading pair in Europe". Similarly, Jonathan Baer of FX Club Global sees the Euro as "a major and powerful force in worldwide interest rates and markets". Indeed, the Euro is a major influence on the trade in all of Europe and beyond.
So, what are the fundamental factors driving the Eur/USD? To begin with, it appears to be that the European debt crisis is having an effect on both the Euro and the USD. Economic analysts have been looking at the relationship between the two currencies for some time now and the results have been consistent. On one hand, the Euro has lost ground against the dollar on several occasions over the last few years. On the other hand, the European Central Bank has been purchasing large quantities of the debt-ridden Eurozone countries' debt, in order to help them regain financial footing and prevent from defaulting on their accumulated debts. Many economic experts believe that this action by the ECB is necessary to maintain the current status of the Euro as the currency of choice for European companies.
But while all this was going on, there has been a major force shaping up the Forex markets. This is that the European Central Bank is pursuing its mission of keeping the national banks in balance. The last few years, it has tried to loosen monetary policy to help banks lend money more easily. The result has been that commercial banks have been given more opportunities to lend money to businesses and individuals, and so they have been promoting their respective currencies rather than the US dollar.
This strategy seems to have backfired, however. First of all, because commercial banks have been increasing their lending to businesses, this has resulted in more European companies filing for bankruptcy. Meanwhile, it is widely accepted that the ECB has not done enough to stimulate the real estate market in Europe. One major argument against this is that the euro is much weaker compared to the dollar, which means that if the economy becomes weaker due to increased interest rates and stricter regulations, then the exchange rate between the two currencies will become worse. The ECB has, therefore, tried to strengthen the euro by making it more marketable and less susceptible to fluctuations.
There are some analysts who argue that the ECB has tried to solve two problems at once, leading to weak EUR and stronger USD. This argument is not entirely correct, though. Because the weakening of the euro has hurt many European companies, especially those located in Northern Europe, it also indirectly hurt the US economy. In fact, according to recent studies, the impact of the euro's recent decline on the US economy is worse than originally thought. This is because the decline has reduced the fed funds that are available to invest in the US dollar, meaning that US companies would receive less foreign money if the euro strengthened even more.
Another argument against Eur Usd Forex is that it is bad to trade in Euros and the USD using a demo trading account. According to this argument, you are unable to determine the true value of the euro based on the current exchange rates and you are risking to lose money if you do not make the right decisions. However, this argument may be partly true. If you open a demo trading account and have no knowledge about the values of different currencies, then there is no way for you to decide what the real value of a particular currency would be. This can cause you to make bad investments, but on the other hand, opening a demo account and learning more about the currencies could allow you to get a better idea about which currency to trade in if you decide to go for the EUR/USD pair.
The fourth argument against Eur Usd Forex is that it lacks a reliable indicator. According to this argument, a reliable indicator such as the EUR/USD should be added to the list of tools used by traders who trade in the Eurozone. The EUR/USD is considered as the most reliable economic indicator by several traders, which is why it forms part of several tools used by Eurozone investors. If you use any indicator that does not conform to the standards of the Eurozone, then you run the risk of losing money.