We are going to use fundamental analysis to help us decide whether to buy or sell a specific currency pair and Make Money in the next examples:
- EUR/USD
The euro is the base currency and thus the “basis” for the buy/sell. If you believe that the U.S. economy will continue to weaken, you would execute a Buy EUR/USD order. Doing this, you have bought euros in the expectation that they will rise versus the U.S. dollar.
If you believe that the U.S. economy is strong and the euro will weaken against the U.S. dollar you would execute a Sell EUR/USD order. Doing this, you have sold euros in the expectation that they will fall against the US dollar.
- USD/JPY
The U.S. dollar is the base currency and thus the “basis” for the buy/sell. If you think that the Japanese government is going to weaken the yen, you would execute a Buy USD/JPY order. By doing so you have bought U.S dollars in the expectation that they will rise versus the Japanese yen.
If you believe that Japanese investors will hurt the U.S. dollar, you would execute a Sell USD/JPY order. By doing so you have sold U.S dollars in the expectation that they will depreciate against the Japanese yen.
- GBP/USD
The pound is the base currency and thus the “basis” for the buy/sell. If you think the British economy will continue to do better than the U.S. in terms of economic growth, you would execute a Buy GBP/USD order. By doing so you have bought pounds in the expectation that they will rise versus the U.S. dollar.
If you believe the British’s economy is slowing while the United States’ economy remains strong, you would execute a Sell GBP/USD order. By doing so you have sold pounds in the expectation that they will depreciate against the U.S. dollar.
- USD/CHF
The U.S. dollar is the base currency and thus the “basis” for the buy/sell. If you think the Swiss franc is overvalued, you would execute a Buy USD/CHF order. Doing this you have bought U.S. dollars in the expectation that they will appreciate versus the Swiss Franc.
If you believe that the dollar will weaken, you would execute a Buy USD/CHF order. By doing so you have sold U.S. dollars in the expectation that they will depreciate against the Swiss franc.