News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Mixed
Oil - US Crude
Bearish
Wall Street
Mixed
Gold
Mixed
GBP/USD
Mixed
USD/JPY
Bullish
More View more
Real Time News
  • Central banks often deem it necessary to intervene in the foreign exchange market to protect the value of their national currency. Learn how central bank intervention can impact your trading here: https://t.co/8G8mUX4so6 https://t.co/MAn2EL32sU
  • In the week ahead, around 25% of S&P 500 companies will release their results, including GE, Johnson & Johnson, 3M, Microsoft, Boeing, AT&T, Facebook, Apple, Tesla, Visa and Amazon. Read more on my earnings outlook report. https://www.dailyfx.com/forex/fundamental/forecast/weekly/title/2021/01/17/Dow-Nasdaq-SP-500-Outlook-Earnings-May-Bring-Positive-Surprises.html
  • Wall Street Futures Update: Dow Jones (+0.20%) S&P 500 (+0.28%) Nasdaq 100 (+0.51%) [delayed] -BBG
  • Nearly 80% of the S&P 500 constituents closed in the red on Friday, dragged by materials (-0.43%), financials (-0.38%) and energy (-0.34%) whereas defensive utilities (+0.20%), real estate (+0.15%) and communication services (+0.02%) outperformed. https://t.co/vf08Fhfvxd
  • Traders focus a lot of their energy on spotting the perfect time to enter a trade. While this is important, it is ultimately where traders choose to exit trades that will determine success. Learn about the three types of trading exit strategies here: https://t.co/muYkTNXH7s https://t.co/fSRW0Z8mNQ
  • There are three major forex trading sessions which comprise the 24-hour market: the London session, the US session and the Asian session. Learn about the characteristics of each session here: https://t.co/reRmDe1Ksp https://t.co/RyMqsHehsY
  • RT @GunjanJS: This is pretty wild. Last year, in RECORD year for options, about 30 million contracts traded daily. This year, it’s been mo…
  • Implementing a trading checklist is a vital part of the trading process because it helps traders to stay disciplined, stick to the trading plan, and builds confidence. Learn how to stick to the plan, stay disciplined, and use a checklist here: https://t.co/SQUCCZ9dzS https://t.co/KD6mfkiCaW
  • What are some technical and fundamental factors affecting the equities market? Get your free forecast here: https://t.co/YQG1aaIT8C #DailyFXGuides https://t.co/TEoSjMpMBo
  • Use this technical analysis pattern recognition skills test to sharpen your knowledge: https://t.co/Qgz89PTxnu https://t.co/H9fW9ewiQd
Learn Forex: 2 Benefits of Trading Forex Crosses

Learn Forex: 2 Benefits of Trading Forex Crosses

Jeremy Wagner, CEWA-M, Head of Education

Article Summary: Many forex traders focus on trading the major currency pairs (pairs not involving the USDOLLAR. Learn 2 forex trading advantages to benefit from while trading cross pairs.

Most forex research and forex trading volume circles around the USDOLLAR. Limiting your research and forex analysis to just the USD pairs also limits your realm of possible trading opportunities. Here are 2 benefits one can realize while considering the forex cross pairs (register for this free 20 minute New2FX Course if you are interested in learning more about majors and crosses).

2 Advantages of Trading Cross Pairs:

  • Stronger trends can develop in cross pairs versus majors
  • Insulate your trades from US news releases

Stronger Trends

Which currency pair has moved the most since January 1, 2010? Answer: EURNZD which has moved down about 4100 pips.

Learn Forex: Benefit of Trading Crosses – Strong Trends

2_benefits_of_trading_forex_crosses_body_Picture_3.png, Learn Forex: 2 Benefits of Trading Forex Crosses

(Created using FXCM’s Marketscope 2.0 charts)

In fact, the next strongest trends since January 2010 are all cross pairs (EURAUD, GBPNZD, and EURJPY). You would think by listening to the news media about the weak US Dollar that it would be in one of the strongest down trends, but clearly it is not.

Strong trends such as the above are generally created by diverging interest rate expectations. In the case above, the sovereign debt crisis has been taking a toll on the EUR as various parts of the region have been experiencing bank runs. On the other hand, the New Zealand economy has been holding up which has kept their central bank’s target rate relatively high. Therefore, an investor selling Euro to hold Kiwi’s gets paid a daily interest rate to hold the trade open overnight.

2_benefits_of_trading_forex_crosses_body_Picture_2.png, Learn Forex: 2 Benefits of Trading Forex Crosses

(Created using FXCM’s TSII Platforms)

You can see how much the currency pays by checking the dealing rates window of the FXCM Marketscope charts. In the example above, holding a 10k sell position at 5pm ET pays $0.60.

Insulate from US Dollar Moves

The second benefit becomes particularly important during weeks of heavy fundamental news announcements. You can find out if there is a busy calendar by checking on DailyFX’s forex economic calendar.

This current week was especially heavy with 5 central banks releasing their latest change (if any) to their benchmark interest rate. Then, to finish up the week, Friday morning is the announcement of the jobs report through the US Non-Farm Payroll figure.

Needless to say, this produces a lot of potentially market moving event risk on the calendar and trading cross pairs can help insulate our trades of US news releases.

Although it is possible the cross pairs can make a strong move, if you want to be exposed to the market but not have to pick a direction of the US Dollar, then a cross pair is your answer.

Learn Forex: Benefits of Trading Crosses – Insulate from US Dollar

2_benefits_of_trading_forex_crosses_body_Picture_1.png, Learn Forex: 2 Benefits of Trading Forex Crosses

(Created using FXCM’s Marketscope 2.0 charts)

Let’s assume, for a moment, that you want to trade EUR to the downside because you think the pair is overbought. In lieu of trading the EURUSD, look for technical set ups in other cross pairs like EURGBP (see above), EURJPY or EURNZD (see below).

These three pairs were showing technical set ups earlier in the week where the trader would not have to be exposed to the US Dollar and its trends.

Learn Forex: EUR/JPY Largest Mover for Past 10 Days

High Probability Breakout Trading in Forex 12.5 (video 66 minutes with EURNZD Head & Shoulders pattern discussed near 57 minute mark)

Happy Trading!

---Written by Jeremy Wagner, Head Trading Instructor, DailyFX Education

Follow me on Twitter at @JWagnerFXTrader.To be added to Jeremy’s e-mail distribution list, click HERE and enter in your email information.

Been trading FX but wanting to learn more? Been trading other markets, but not sure where to start you forex analysis? Register and take this Trader Quiz where upon completion you will be provided with a curriculum of resources geared towards your learning experience.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES