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The Best Times to Trade the US Dollar

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Introduction:

The US is the second largest trading center in the world. It is the third trading session of the day, following the European session. Trading during this session constitutes twenty-two percent of the world’s total currency trading volume for the day. In this respect, it is very similar to volume during the Asian-Pacific session. Since New York gets the largest share of the region’s trading volume (19 percent), it is the headquarters for the US trading session. The major currency focus during the US session is the US Dollar (USD). The high value of US Dollar-transactions leads to high volatility and volume levels.

Session Hours:

The US Session runs from 8am (ET) to 5pm (ET).

For Risk-Tolerant Traders:

The US session presents a moderate to high risk for traders. It can present unique challenges to risk-tolerant traders because of its interaction with the stock and bond markets.

Currency pairs with good pip movements during this session are:

  • GBP/USD
  • GBP/JPY
  • USD/JPY

The average pip range is approximately 95 pips. The USD/EUR is also a strong alternative during this session, but can make even larger moves during the European-US crossover session.

Another viable option is the USD/CAD, which averages 84 pips during the session.

For Risk-Averse Traders:

The European session presents a moderate to high risk to traders. During this session, price changes with European currencies can be quick and erratic, particularly after the European session has closed.

Currency pairs with lower risk during this session are:

  • EUR/GBP
  • EUR/CHF
  • NZD/USD

The average pip range is approximately 45 pips.

My Thoughts:

The US session is very exciting and challenging. Economic data is usually released early in the morning (between 8:30am and 10:00am) and certain reports cause the FX market to move during the US session. A huge number of transactions involve the USD so it will be in constant motion. The bond, stock, and commodities markets are closely connected to the FX market so any news or events that affect those markets will move the USD. This is particularly true for the bond market. Watch for any news or holiday closures in that market because the USD will be affected.

My Basic Trading Practices:

It is both safest and most potentially profitable to focus on trading the USD during this session in either a long or short position. Currency pairs that involve non-major currencies (like the New Zealand Dollar (NZD) or Australian Dollar (AUD)) might be tempting, but they are more suitable for long-term trading or investment positions rather than day trading or swing trading. However, major currencies like the British Pound (GBP), the Swiss Franc (CHF), and the Japanese Yen (JPY) can major strong and reliable price moves.

My Advanced Trading Practices:

My focus during the US session is on trades that are strong trending on the daily or hourly charts. I can usually find currency pairs with an ADX of 30 or 35. These trends will be even stronger when economic data has been released. The Non-farm Payrolls, the ISM Manufacturing Survey, the Consumer Price Index (CPI), the Gross Domestic Product (GDP) and the Retail Sales report are the biggest USD movers. Fed meetings and decisions will also move the USD in big and sometimes surprising ways. However, do not ignore the power of the European Central Bank (ECB) and Bank of England (BOE) to put pressure on the USD.

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