Effect of Currency Cross Pair Against Major Currency Pair
Currency Cross Pair Okay, let’s continue the last trip about currency cross pair lessons! let’s start the lesson by assuming that the Fed will raise interest rates so what will happen? yes, lots of forex traders are starting to buy US Dollars (USD) using various currencies … so the EUR / USD and GBP / USD prices fall while USD / JPY and USD / CHF prices will rise.
And you also choose the EUR / USD major currency as an option then open the SELL position of the currency pair and the result is you get a lot of profit or PIPS. But before you enjoy the results of the profits, it turns out your friends also get more benefits than you by opening BUY positions USD / JPY.
You wonder what actually happened? even though both of them buy dollars, how come the profit is greater than my friend! You also reflect …
And here’s the answer …
When compared it turns out that the USD / JPY price movement is greater than the EUR / USD currency pair. And it turns out that the USD / JPY currency pair is able to break the main resistance level and rise by as much as 250 Pip when compared to the EUR / USD currency pair which is unable to break the support level and only drops by 125 Pip.
So you start thinking, If the US Dollar strengthens against all currencies in the forex market but why is the movement of the currency pair EUR / USD weaker compared to USD / JPY?
Well it turns out this is caused by the cross pair currency trading on the forex market in this example is EUR / JPY.
When the USD / JPY currency pair is able to break the main resistance level, a combination of stop loss is reached and the price starts a breakout that encourages traders to give USD USD higher.
And because excessive purchases of USD / JPY currency pairs will weaken the Japanese JPY currency, this will cause the EUR / JPY currency pair and possibly all JPY Cross Pair to break the main resistance level so that the stop loss combination is reached and the price starts a breakout which encourages traders to give EUR / JPY higher.
This will cause the EUR currency to strengthen and slow down the decline in your major currency USD / EUR. So that the purchase of a EUR / JPY currency pair like a knife falls or you are falling 🙂(Just Kidding) and because of this is why the EUR / USD currency pair that you selected was not moving as much as the USD / JPY movement.
So, currency cross pair trading will have a lot of influence on your trading activities right!