Forex market provides traders the potential of making good money, at the same time, risks are also inevitable. Traders who are interested in forex trading should do their homework well beforehand in order to make good money. One of the things that they need to know is the major currencies in forex trading and the factors that may influence their value. Today, I am going to introduce USD-one of the major currencies in the forex market.
Why traders need to know USD in forex trading?
Novice traders who want to try hand in forex trading should first know USD. After we see the major currency pairs in forex trading, we will know why USD is so important in forex trading. Here are the majors: EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CHF and USD/CAD. From the majors, we know that USD appears in every major currency pair. The U.S. dollar is the currency most used in international transactions and is one of the world’s dominant reserve currencies. It represents nearly half of the trading volume of the major currencies, and it is the default currency for most transactions. Several countries use it as their official currency. From the above, it is not difficult for traders to understand that USD holds such an important position in the forex market at present. Thus, it is necessary for traders to understand USD before trading.
What influence the value of USD?
A lot of forex traders try to predict the USD value in order to make right decisions. There are a great number of factors that can be used in order to predict forex rates such as interest rates, price levels and so on. These factors can predict forex rates, but sometimes they do not work especially well in practice because traders consider numerous other factors in their buy/sell decisions and the momentum of speculation itself can influence exchange rates. But USD can be influenced by some major factors as follows. Generally, USD value is basically determined by the basic theory-supply and demand. When the demand for USD increases, the value of USD will go up accordingly. On the contrary, when the demand for USD decreases, the value of USD will go down accordingly. The value of the dollar is also heavily influenced by economic data. Data that makes the U.S. economy look stronger can be positive for the dollar and vice versa. Accordingly, traders need to pay careful attention to the scheduled releases of economic data like GDP, trade balances, interest rate and inflation etc. These data comes out at regular intervals. Traders are accessible to these numbers freely on the internet; they can also get the consensus expectations for these numbers, which can be used as reference when making trading decisions. Furthermore, the USD can also be driven by global condition. According to history, USD is prone to gain strength when the world is in chaos, at war, economic and political instability; on the contrary, when the global condition is more peaceful and stable, traders tend to diversify away from the USD.