· 5 min read
Understanding Forex Market Drivers
A currency pair is a relative bet. You are never analysing one economy — always two at once.
EUR/USD does not go up because the euro area is doing well. It goes up because the euro area is doing better, relative to expectations, than the United States is.
Rate differentials do most of the work
The expected path of policy rates on both sides is the dominant medium-term driver for major pairs. A currency can rise on bad news if that news makes rate cuts less likely.
Positioning amplifies surprises
When most participants already lean one way, a modest surprise in the other direction produces an outsized move as positions unwind. This is why FX reactions often look disproportionate to the data.
Ranges and their breaks
Major pairs spend long stretches inside ranges, which makes range strategies attractive and dangerous: they work repeatedly and then fail badly once, when the range breaks on a policy shift.
All articles
How Market News Can Create Trading Opportunities
News does not move prices by itself. What moves prices is the gap between what was expected and what was reported.
How to Read a Trade Setup
Read a setup in the order that protects you: stop first, then target, then thesis.
Understanding Entry, Stop Loss and Target
Three prices define a trade. Each one answers a different question, and mixing them up is expensive.