How to trade the US dollar profitably


Since the dollar and the euro are the most popular in the world, pair EUR / USD appears in the largest volume of foreign exchange transactions. Given the high volatility, many traders prefer this particular trading instrument. In this case, the dynamics of the movement of the pair is formed by both currencies, depending on the strength of one or the other at the moment. Let’s find out what in this tandem affects the dynamics of the US dollar.

Who issues the dollar?

The American Central Bank, which bears the name of the Federal Reserve System (FRS), issues dollars. The regulator’s priorities include high employment, stable purchasing power and economic growth in the United States.

The central bank can influence the rate of the American currency using the following methods:

  • By changing the discount rate;
  • Using financial market instruments;
  • Changing reserve requirements;
  • Conducting foreign exchange transactions.

At the moment, the US dollar is the world currency to which all assets and goods are tied. Therefore, most traders choose it for trading.

Which pairs with the dollar to choose?

The list of pairs that include the dollar is quite extensive. It is part of the major (major) and exotic pairs. The main pairs are those with the highest liquidity and trading volumes. In addition, spreads for major pairs are usually minimal. Here are the major pairs and their features:

  • EUR / USD pair is the most popular. It features the largest trading volume, low spread and medium volatility. It is most active during daytime trading.
  • USD / CHF pair most often shows a movement opposite to the EUR / USD pair. Increased activity is noted during daytime trading.
  • GBP / USD pair Is a pair with very high volatility, it actively reacts to events from the UK. The greatest activity is shown during the day trading.
  • USD / JPY pair… Since the yen is viewed as a defensive currency, the pair may decline during crises and rise during upward market dynamics. It is most active during Asian trading.
  • USD / CAD pair… As a commodity currency, the Canadian dollar reacts to changes in oil prices: if they rise, the pair declines and vice versa. The pair is most active during the work of the American trading floor.
  • Pairs AUD / USD and NZD / USD are commodity currencies, and their behavior is similar. They usually show calm dynamics, actively reacting to changes in prices for milk powder and metals. They are most active during the night session.

When is the best time to trade the dollar?

Currency assets with the US dollar are most active during the American session, but since many of them include European currencies, they are also active during the European session. So it is better to trade EURUSD and GBPUSD during London trading, as well as in the first hours of the American session, when the work of the two platforms intersects. At this time, the maximum trading volume is noted.

For intraday trading, day and evening sessions are suitable, and for scalping, night trading is the most optimal. Moreover, traders are attracted by the narrow spread. True, it may differ from broker to broker. For example, AMarkets ECN has accounts with spreads from 0 pips, which will help you start trading with the lowest commissions.

Dollar and news

Trade in US dollars USDYou need to know that the news on the dollar has an impact on other currencies along with gold. Usually important news, marked in red on the economic calendar, deserve attention. It is recommended to open trades 20 minutes before and 20 minutes after the release of important news, since the market is experiencing abnormal volatility. Better to wait for the situation to calm down. There are several important news that can significantly affect the dynamics of the dollar and the currency pairs it belongs to. These include:

  • Data from the minutes of the meeting of the Federal Open Market Committee (FOMC)… They reflect the committee’s position on monetary policy.
  • Consumer Confidence Index. It is an indicator that predicts consumer spending, partially reflecting economic activity. A high index speaks of consumer optimism and has a positive effect on the dollar exchange rate.
  • Fed Chair Speeches, from which you can learn about the intentions of the regulator regarding future changes in monetary policy.
  • Baseline retail sales index is a measure of the monthly retail sales (excluding the car segment). It reflects the volume of consumer spending, as well as the pace of US economic development. If the indicator exceeds expectations, then this is seen as an incentive for the growth of the US dollar, and vice versa.
  • Unemployment rate… Reflects as a percentage the total number of working citizens to the number of those who are now in the position of unemployed, but are actively looking for work in the States. A high value of the indicator indicates that the labor market is under pressure and is a negative factor. On the contrary, a low reading is perceived as a bullish factor for the dollar.

While working with foreign exchange instruments, which include the US dollar, you need to be extremely careful about the upcoming news, which have an impact on its dynamics. At the same time, do not forget about the news that plays an important role for the second currency in the pair.

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