How can we use interest rates and implement them for trading? well, a lot of traders prefer to look at the difference between the interest rates of the two currencies in the couple. This is usually a starting point in the process of deciding whether a couple is going to go up or down.
The difference between the interest rates is known as interest rate differential and for a lot of traders it is a key in the valuating process.
Difference in interest rates may be of enormous help when it comes to identifying shifts in price that may or may not be obvious on the first glance.
The largest swings are usually produced by the couple where interest rates are going in the opposite direction. This happens because while one currency gets support from the consumers the other one does not, thus relying solely on the support of international traders as well as its own strength.
So, we can say that watching out for the interest rates can be of good use. Those currencies that go in the opposite directions are much more prone to the swings, thus providing us with the outbreaks of the chart.