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Currency markets are seeing volatility not seen in the last three decades. It is being dubbed as the millionaire making machine. Millions? Are you taling of millions. Do you know about Bruce Kovner, a former NYC taxi cab driver who started with only ,000 on his credit card and ended up making billion trading currencies. Now, you can't be like Bruce Kovner but I am sure, you can make a few millions if you make a serious effort. The more volatility in the currency market, the more profit you make. Elections, strikes, presidential elections,change of governments, crisis in any part of the world, breaking news good or bad can lead to volatility in the market. Get these Forex Scapling Cheatsheets plus the Ultimate Swing Trading Software FREE. Discover an award winning Forex Trading System that makes 2956.16% ROI per month.

Now as a currency trader, you should use both fundamentals and the technicals in your trading. Fundamentals about a currency pair tell you about the long term trend and the technicals the short term. Let's discuss the fundamentals that can affect EURUSD currency pair. While trading EURUSD pair, you should keep an eye on both Europe and US. Europe is basically driven by these three countries Germany, France and Italy. Whatever happens in these three countries is going to effect Euro. There are many other countries in the European Monetary Union but these three are the most important. Now, European Central Bank (ECB) is tasked with the main responsibility of fighting inflation in the Euro Zone. Most of the countries in the Euro Zone have to follow a tight fiscal policy with a check on the budget deficits. Interest rate is the main weapon against inflation. ECB tends to keep the interest rate stable.

On the other hand, Federal Reserve Bank (FED) in US follows a more liberal and market oriented approcah. Interest rate is seen as a tool to adjust the economic activity. Low interest rates tend to favor economic activity. FED tends to keep interest rates low. Right now, interest rates in US are low in order to generate more economic activity and employment. FED printed a lot of greenback after the stock market crash of 2008 to help a lot of failing banks. Many banks are supposed to fail in 2010. Under TARP, a lot of money was dished out to failing banks and insurance companies. This increase in money supply is going to be inflationary in the long run. But right now FED is content with low interest rates as this is required to defreeze the economy from a credit crunch that happned when banks started to fall like dominoes. FED tends to keep USD trend in one direction for long periods of time. USD may lose it's value as inflation heats up in the economy.

Now, the most important thing that you need to keep in mind while trading Euro is that the European Central Bank (ECB) tends to take a strict policy against inflation. This has something to do with the period of hyperinflation experienced by Germany after the First World War that had devastated the German economy and the German working class. With history at the back of their minds, ECB raised interest rates more than it lowers it.

Now, another thing that you need to keep in mind is the politics and economic growth is interlinked. When US economy slows down and interest rates are lowered by the FED just like the present, money starts to flow abroad. In the past, it used to be Japan. But the market knows that the Japanese Central Bank (JCB) does not like a strong Yen (JPY). So it starts selling JPY to stabilize it. This means that the default currency when USD weakens is the Euro now.

Using fundamental analysis will tell you how the market is going to behave in the coming six months to one year. While technical analysis is going to tell you how the price action is going to shape up in the coming minutes, hours, days or even weeks. Technical analysis will tell you when to enter into a trade and when to exit a trade. EURUSD is one of the most heavily traded pair in the world with good liquidity. This is one of the reason for its popularity. Another heavily traded currency pair is GBPUSD. Since, Great Britain is not part of European Monetary Union, the correlation between Euro and GBP is not that strong. Sometimes looking at the cross pair EURGBP can give you an important clue how the pair EURUSD is going to behave.

Tags: eurusd, eurusd trading, trading eurusd, trading usdeur, usdeur, usdeur trading