The euro (EUR) ranks second behind the U.S. dollar (USD) in terms of global liquidity, trailed by the Japanese yen (JPY) and British pound (GBP). Forex traders speculate on EUR strength and weakness through currency pairs that establish comparative value in real-time. Although brokers offer dozens of related crosses, most clients focus their attention on the six most popular pairs:
U.S. dollar (USD) – EUR/USD
Swiss franc (CHF) – EUR/CHF
Japanese yen (JPY) – EUR//JPY
British pound (GBP) – EUR/GBP
Australian dollar (AUD) – EUR/AUD
Canadian dollar (CAD) – EUR/CAD
EUR trades continuously from Sunday evening to Friday afternoon in the United States, offering significant opportunities for profit. However, volume and volatility can fluctuate greatly in each 24-hour cycle, with bid/ask spreads in the less popular pairs widening during quiet periods and narrowing during active periods. While the ability to open and close positions at any time marks a key benefit of forex, the majority of trading strategies unfold during active periods.
Many forex traders focus their full attention on the EUR/USD cross, the most popular and liquid currency market in the world. The cross maintains a tight spread throughout the 24-hour cycle, while multiple intraday catalysts ensure that price actions will set up tradable trends in both directions and along all time frames. Long- and short-term swings also work extremely well with classic range-bound strategies, including swing trading and trading channels.
Euro Price Catalysts
The best time to trade the euro coincides with the release of economic data, as well as the open hours at equity, options and futures exchanges. Planning ahead for these data releases requires two-sided research because local (eurozone) catalysts can move popular pairs with the same intensity as catalysts in each of the cross venues. Moreover, U.S. economic data can have the greatest impact on all currencies, due to the overriding importance of the EUR/USD pair.
In addition, EUR crosses are vulnerable to economic and political macro events that trigger highly correlated price actions across equities, currencies and bond markets around the world. China’s devaluation of the yuan in August 2015 offers a perfect illustration. Even natural disasters have the power to generate this type of coordinated response, as evidenced by the 2011 Japanese tsunami.
Eurozone monthly economic data is generally released at 2 a.m. Eastern Time (ET) in the United States. The time segment from 30 to 60 minutes prior to these releases and one to three hours afterwards highlights an enormously popular period to trade EUR pairs because the news will impact at least three of the five most popular crosses. It also overlaps the run-up into the U.S. trading day, drawing in significant volume from both sides of the Atlantic.
U.S. economic releases tend to be released between 8:30 a.m. and 10 a.m. ET and generate extraordinary EUR trading volume as well, with high odds for strongly trending price movement in the most popular pairs. Japanese data releases get less attention because they tend to come out at 4:30 p.m. and 10 p.m. ET, when the eurozone is in the middle of their sleep cycle. Even so, trading volume with the EUR/JPY and EUR/USD pairs can spike sharply around these time zones.
Euro and Equity Exchange Hours
The schedules for many EUR traders roughly follow exchange hours, centering their activity when the Frankfurt and New York equity markets and Chicago futures and options markets are open for business. This localization generates an increase in trading volume around midnight on the U.S. East Coast, continuing through the night and into the American lunch hour, when forex trading activity can drop sharply.
However, central bank agendas shift this activity cycle, with forex traders around the world staying at their desks when the Federal Reserve (FOMC) is scheduled to release a 2 p.m. ET interest rate decision or the minutes of the prior meeting. The Bank of England (BOE) issues its rate decisions at 7 a.m. ET, while the European Central Bank (ECB) follows at 7:45 a.m. ET, with both releases taking place in the center of high volume EUR activity.
The Bottom Line
Six popular currency pairs offer euro traders a wide variety of short- and long-term opportunities. The best times to trade these instruments coincide with key economic releases at 1:30 a.m., 2 a.m., 8:30 a.m. and 10 a.m. U.S. Eastern Time, as well as between midnight and noon, when European and American exchanges keep all cross markets active and liquid.