Draw the graph · Macro · Foreign exchange market
Europeans buy more US goods
Drag a curve sideways, or use its arrows. A curve you do not move is a curve you are saying stays put. Make each shift clear enough that a reader could see it.
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Demand for the currency shifts right. Supply of the currency stays put.
European buyers pay for US goods in dollars, so they must buy dollars with euros. At every exchange rate they want more dollars, and the demand for dollars shifts right. The supply of dollars is unchanged. The dollar appreciates.
The dollar appreciates against the euro and more dollars are traded.
Common mistake. Students sometimes shift the supply of dollars right because 'more dollars are flowing.' The dollars are being bought by Europeans, which is demand. Supply comes from Americans selling dollars.
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Lesson: Trade & Exchange Rates