Trading Fundamentals With Currency Crosses

What is a Currency Cross Pair?

Back in the olden days, if anybody wanted to change currencies, they first need to exchange their currency into  U.S. dollars and only then could they convert their dollars into the currency they have chosen.

Lets say, if a  person wanted to change their U.K. sterling into Japanese yen, the first thing they need to do is to exchange their sterling into U.S. dollars, and only after that they can convert these dollars into yen.

How to Trade Fundamentals With Currency Crosses

If tough economic statistics comes out of Australia, you might need to look at buying the AUD. Your first response might be to buy AUD/ USD. However, what if at the same time, the current data also display the United States experiencing strong economic development? The price action of AUD/USD may be flat.

One choice that you have is to match the AUD against the currency of an economy that is not doing so well and what can you do?

The good thing is that we have forex  for currency crosses!

Let’s just say you did some analysis, and you notice that the Japanese economy is not doing so good right now.

What will you do?

Undeniably, like any self-respecting bully, you will jump up all over this opportunity and go long  AUD/ JPY! In trading industry, there is nothing wrong with being a bully. It’s your business as a forex trader to take advantage of certain breaks so that you can put some silver dollars into your savings.

Because of currency crosses, you now have the chance to match the currency of the best performing economy against that of the smallest economy without having to deal with the U.S. dollar.

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