Taking in account the last troubles in Europe and the relatively "stability" here in the USA some people are scratching their heads trying to understand why the euro is still trading away above parity with the dollar.
If you have some experience trading currencies you know that trends are not based on single factors. Yet one of the most important factors ( if not the most important) is commercial demand.
The 3 charts below shows the current account per GDP on Japan, Eurozone, and in the USA.
Take a look where the zero line is.
Current account means the end balance after you subtract exports from imports.
Japan has a big positive current account meaning that to square their books the exporters exchange their dollars for yens which means buy the yen and sell the dollar.
The Eurozone current account does not look as good as Japan's but compared to the American current account it looks better so at the end of the day the european exporters also exchange dollars for their own currency meaning buying euros.
Because of many other factors the euro drops but it always pop up again because the current account is positive against the dollar.
As the dollar gets weaker and other geopolitical factors develop this imbalance can change but so far the Euro is more or less where it should be.
Above the dollar.
If you have some experience trading currencies you know that trends are not based on single factors. Yet one of the most important factors ( if not the most important) is commercial demand.
The 3 charts below shows the current account per GDP on Japan, Eurozone, and in the USA.
Take a look where the zero line is.
Current account means the end balance after you subtract exports from imports.
Japan has a big positive current account meaning that to square their books the exporters exchange their dollars for yens which means buy the yen and sell the dollar.
The Eurozone current account does not look as good as Japan's but compared to the American current account it looks better so at the end of the day the european exporters also exchange dollars for their own currency meaning buying euros.
Because of many other factors the euro drops but it always pop up again because the current account is positive against the dollar.
As the dollar gets weaker and other geopolitical factors develop this imbalance can change but so far the Euro is more or less where it should be.
Above the dollar.