I\'m confusing how to choose a long or short position to make a profit when the

Question

I'm confusing how to choose a long or short position to make a profit when the currency exchange rates change. So if I take EUR/USD and the first rate is 1 EUR= 1.1280 USD and the closing rate is 1 EUR=1.1106 USD, that would mean the USD got stronger relative to the EUR? (EUR got weaker?) Therefore, if I had 100,000 USD to buy Euros I'd make a profit if I chose the short position? Or would I make a profit if I chose the long position?

Same goes for if the USD is now the quote price. Let's say it's now USD/CAD and the first rate is 1 USD= 1.3254 CAD and the closing rate is 1 USD= 1.3089 CAD. If once again I had 100,000 USD to use to buy CAD would I make a profit in short or long position? If 1 USD buys less CAD, that means USD got weaker? If I choose a short position (which is to want the currency to decrease in future so I can sell? and which currency do I want to decrease to make a profit??) If someone knows how to make these relationships and terminology easier to understand I'd greatly appreciate it.

Explanation / Answer

Part - A

The euro depriciated against the US dollar in this case and the dollar became stronger. Since you are buying euros worth $100,000, to amake a profit, you have to choose short position since the euro is becoming weaker.

Part -B

In this case the US dollar became weaker and hence taking long postion will generate profits.

General Principle

One way to make it simpler is to convert it into a single base; In the first question USD is on the right hand side and in the second it is in the left hand side. It would be be better to have USD on a single side on the both.

In 1st case 1,USD = 0.8865 EUR and closing rate is USD = 0.9004 EUR. It is very clear that USD got stronger.

In 1st case 1,USD = 1.3254 CAD and closing rate is USD = 1.3089 CAD. It is very clear that USD got weaker.

Now it is easier to understand the relationship and USD is seen increasing in the 1st case and reducing in the 2nd case.

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