In theory, the US dollar and euro should further strengthen after the post-NFP Europe negative. This would help to the euro via NFP. What if these two major economies were to continue strengthening?
The dollar value rises and prices fall in both euros and dollars. Most traders want to buy dollars, gold and sell the euro. However, if the EUR strength was to be gained, then traders may not want to sell the euro.
In contrast, the dollar values fall in both the euro and the US dollar. This is very bad news. A currency should always appreciate when a purchase is made. But weakening for these two currencies would drop paper values.
Therefore, these two major economies should act in reverse in the sense that the euro will depreciate and the USD will appreciate. What happens if the EUR continues to weaken? If the euro traded inversely to the USD, then the USD would appreciate. It is a strong result.
If you were a trader, what would you do? Would you like to invest more in the euro? Or do you want to invest more in the USD? Maybe both traders would be doing the same trade.
An investor might encounter this result, though. If they wanted to sell the euro, they could buy the USD. This would protect both against falling prices in the euro and the USD.
It is a process to counter the result and trade in the opposite direction. This method requires some money and requires that the trader have both information about the euro and the USD.
To do this, an investor would have to investigate how exchange rate movements of the EUR affect. Investors should also have accurate information about the currencies. Market makers and other traders can make an investment if the market believes it is a devaluation. You can also buy the other currency if it is a strengthening of the EUR.
Many investors would not want to trade the USD directly. Generally dollar trading is not recommended. But it would be a very smart move to trade the euro or USD. This would allow the investor to benefit in both cases.
It may seem complicated, but it is relatively easy to trade the EUR or USD. Many people do this without realizing it. Traders who trade in USD and EUR may not recognize this, but it is a great way to make money when trading currencies. There are many ways to trade the two currencies.
This is one of the finer financial theory ideas. Once this trading strategy is implemented, it can produce huge profits for many investors. Investors are therefore encouraged to invest in this strategy.