Mon. Nov 28th, 2022

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How to Trade Fundamentals With Currency Crosses?

1 min read

Currency crosses are a well-liked choice among traders who trade the news. For instance, you want to match a good performing currency with a currency that performs not that well. Suppose, the Bank of England decides to boost interest rates, your first thought could be to shop for GBP/USD. Now, what if the US economy also performs well and the US dollar values? The price action on GBP/USD then will be flat.

With currency crosses, you will match GBP with a currency that doesn’t perform that well. Let’s say Japan reports economic data that missed market expectations. Buying the GBP/JPY might be a way more sensible choice than buying GBP/USD during this case.

Currency crosses can provide valuable clues about the relative strength of major currency pairs. For example, if you see potential trade setups to travel long on GBP/USD or short on USD/JPY, how would you opt which trade to take? An answer to the present could be hidden in currency crosses, specifically the GBP/JPY cross. If the pound is comparatively stronger than the yen, i.e. the cross pair is trending upwards, this might be a signal to go long on GBP/USD.

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