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The EUR/USD is one of the most common traded pairs within the Forex market. Its popularity can be said to be down to the fact that each currency represents one of the world’s two largest economic trading blocs, resulting in there being many multinational corporations that do business in both the United States and Europe. Such corporations tend to have the need to hedge their exchange rate risk. Some of these firms, like international financial institutions, have offices in the U.S and in Europe. Firms that fit this description are usually involved with trading the euro and U.S dollars.
Price movements within this currency pair tend to relate to factors that influence either the EUR or the USD. The EUR and USD both provide tight spreads and continuous liquidity for traders who are looking to buy or sell. For beginners and advanced traders, it is the combination of both the volatility and stability of EUR/USD that makes them such a good pair.
With this currency pair being so popular, arbitrage opportunities can be hard to find. In saying this, the currency pair is very much loved by forex traders. EUR/USD offer a considerably low bid-ask spread and constant liquidity for traders. These two features are considered to be very important towards speculators and contributed to the popularity of the currency pair. Furthermore, the large number of market participates and continuous availability of economic and financial data allows those of trading to formulate and re-examine their positions and opinions of the pair. With this constant activity providing relatively high levels of volatility it can lead to opportunities for profit.
There are over 17 countries which use the euro as their currency and there are around 4 other countries that also use the euro as part of the currency on an unofficial basis. Collectively these countries are known as the ‘Eurozone’ or the ‘European and Economic Monetary Union (EMU)’.
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