Do currency pairs affect each other?

[SterlingTDR]

I'm sure there is an obvious answer to this question, so please forgive my newbieness. If you are trading, let's say EUR/USD, what currencies are affected directly by, for instance, a strengthening Euro?

Is it possible to predict the movements of other currencies based on one currency pair's price action? Surely if the dollar strengthens against the euro, it will strengthen against other currencies too? If one's risk tolerance allows, is this a viable way to trade when there is a strong trend at play, as on Friday with the EUR/USD?

[Amirah]

The most important reason you should be aware of currency correlations is so you know your actual risk exposure. Most novice traders will trade several pairs simultaneously, like shorting EUR/USD and GBP/USD while going long on USD/CHF, not knowing they've tripled their risk.  However, FreshForex provides a reliable and high-speed virtual private server (VPS) suitable for EAs and complex trading systems.