Major forex pairs: What Are Currency Pairs in Forex?

In turn, this would cause the price of AUD/USD to fall – as fewer US dollars are needed to buy an Aussie dollar. That’s why the yen is commonly said to be under a ‘dirty float’ regime – as it is a floating currency, but not in the truest sense of the word. So, trading USD/JPY is a means of capitalising on these more regular fluctuations – if you’re able to buy and sell at the right time.

Political events, interest https://forexbitcoin.info/s, and Australian production of commodities such as coal or copper are factors that can impact AUD/USD. In case you hadn’t noticed, all of the above currency pairs include the US dollar, the world’s reserve currency. The British Pound/United States dollar currency pair, also known as “The Cable”, is widely traded. This currency pair is more volatile than “The Fiber” or “The Gopher”, due to the frequent price fluctuations it experiences. This volatility is preferred amongst certain traders as it creates the opportunity to create larger returns.

The Australian Dollar was introduced in 1966 to replace the Australian Pound and is the currency of the Australian Commonwealth . Today, the Australian Dollar is one of the most traded currencies globally . The Australian economy is a large producer and exporter of raw materials, including Iron Ore, Coal, Petroleum Gas, Gold and Aluminium Oxide. For this reason, like the Canadian Dollar, the Australian Dollar is referred to as a commodity currency. The Canadian Dollar has the name Loonie in the world of Forex trading, which is the name of the Canadian one-dollar coin, which has an image of a common bird in Canada, the loon.

How To Trade the Major Forex Pairs

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Forex trading is especially popular among central banks, government institutions, and traders. Exotic currency pairs differ from the major pairs because they don’t have as much liquidity as others on the market. However, there are some exotic currencies that are worth trading for their unique price action and strategies. The top 10 most popular currency pairs include the Major ones and several Cross currency pairs. Some currency pairs are more liquid than others, which in theory makes them easier to trade.

USD/HKD: U.S. dollar/Hong Kong dollar

CNH has usually not been as tightly controlled as CNY by the Chinese government, which means it can be more volatile. To do this, register on the LiteFinance online platform, open and top up your trading account and start trading. Unlike the exchange, there are no strict requirements for a minimum account balance on Forex.

• Like Canada, Australia is a large exporter of commodities such as natural gas, coal, iron ore and agricultural products.
• Both currencies will have exchange rates on which the trade will have its position basis.
• However, it’s impossible to determine exactly which one is traded the least.
• The flow of capital between these economies allowed EUR/GBP to maintain a relatively stable price movement compared to other trading instruments.
• Not surprisingly, all of these pairs contain the US dollar – due to the sheer size of the US economy.

In this article, we will explore the 10 most traded currency pairs in more detail and highlight the main factors influencing their rates. Minor currency pairs are the second most traded in the forex market, and sometimes referred to as ‘crosses’. These currencies have less liquidity than major currency pairs and as a result, traders will often make more forex trades with minor currencies to reduce trading costs.

Currency Pairs in Forex Trading

profit first from developing or emerging market economies that are paired with a major currency are called exotic currency pairs. These pairings are known to be more illiquid and come with wider spreads; thus, making them riskier. As we mentioned, there are three categories of currency pairs to trade in the Foreign Exchange market – those are major currency pairs, minor currency pairs, and exotic pairs.

Our forex trading page has a breakdown of all spreads and margins that we offer on our currency pairs. Beyond that, many traders are looking to exploit the interest rates differentials in forex trading. This type of currency trading known as the carry trade forex trading strategy is usually more common when trading exotic pairs than trading major currencies or currency crosses. The EUR/GBP currency pair represents how many British pounds are required to buy one euro. Because this pair includes two major European currencies, it’s one of the most popular currency pairs across the globe.

The AUD/USD rate depends on production volumes and commodity prices, as Australia is a major exporter of agricultural products and minerals. The state of the economies of China and Japan also affects the pair’s rate. The best time to trade the American dollar for the Japanese yen is from 12 pm to 8 pm GMT and from 11 pm to 8 am .

Cross currency pairs

Forex and CFDs are leveraged products and can result in losses that exceed your deposits. Choose abuyposition if you believe that the value of the base currency will rise compared to the quote currency. Choose asellposition if you believe that the value of the base currency will fall compared to the quote currency. This is how you decide whether to go long or short, as well as what strategy to take. You might look at current and historical charts, monitor the news for economic announcements or consider applying a few technical indicators. We’ll cover leverage and risk in more detail in the How to trade course.

It is also possible to sell a pair more expensive and then close the short trade when the price falls. They are called majors because 75% of all trades are with these pairs. The USD/JPY, GBP/USD, and USD/CHF follow with a relatively smaller share of the market. USD/CAD is commonly called the ‘loonie’ on account of the loon bird which appears on Canadian dollar coins, and it represents the pairing of the US dollar and the Canadian dollar. In 2019, USD/CAD transactions made up 4.4% of daily forex trades.1 The strength of the Canadian dollar is closely linked to the price of oil because oil is Canada’s main export. Among the seven major currency pairs, the bulk of the transaction is usually within thesetop four, so these are usually the most liquid currency pairs there is out there.

Factors That Affect the Price of Forex Pairs

Scalping, day trading, and swing trading are considered to be the most profitable on the Forex market. A currency pair is the value of one currency quoted against the other. For example, USD/JPY shows how much Japanese yen you can buy for $1.

Due to the fact that these pairs are popularly and often traded, the price bands tend to be narrower but–like all currencies–they’re still subject to the volatility of the market. Exotic currency pairs are the third most traded in the forex market. These pairings include the combination of one of the 8 major currencies and a currency from a developing or emerging economy. There are also many popular exotic pairs amongst traders that are exotic vs exotic, such as NOK/TRY or TRY/RUB.

• On the world market would likely cause a reciprocal slump in the value of the Australian dollar.
• Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority.
• Slava Loza Forex Trader & Analyst More than 50% of trades in the Forex market somehow involve the US dollar.
• The best time is when both European and American markets are open, and both are ready for business.
• While they are considered safe-haven currencies it should be noted that even safe-havens have the tendency to depreciate at times, and so traders should not completely rely on them.
• Many view exotic currency pairs as having higher risk profiles compared to commonly traded currencies.

The world’s largest foreign exchange market is based in London, with 37% of all forex turnover made there. Another thing worth noting in the working of currency pairs is the pairs’ Currency Correlations. A Currency Pairs’ Correlation is the similarities between several pairings, and it useful when determining what pair to buy or sell.

The high volatility of these pairs is due to the pairing of a strong major currency with a more developing and unstable currency. The three main types of currency pairs are majors, minors and exotics. The major currency pairs are often the most popular to trade, as they are the most liquid. Minor currency pairs are ones which leave out the United States dollar, and they are normally less liquid. Examples include the euro and Swiss franc (EUR/CHF), Canadian dollar and Japanese yen (CAD/JPY), or pound sterling and Australian dollar (GBP/AUD). Cross pairs can provide trading opportunities when the majors are presenting less favourable conditions.

Commodity currencies are those from countries that have large quantities of commodities or other natural resources. The exchange rate of the currencies of these countries are tied to their respective export activities. This is because the strength of the economy can be highly dependent on the prices of their natural resources. Examples of these countries include Russia, Saudi Arabia and Nigeria. In currency trading, traders often look for currency pairs with the highest pip values, as they are very useful for short-term strategies, such as day trading.

The Euro was launched in 1999, originally replaced 11 national currencies and now is used in 19 European countries by over 300 million individuals. But the value of the Canadian dollar is also heavily correlated with commodity prices, especially the price of oil, as Canada’s economy relies heavily on exporting crude. So, this makes it important to monitor the price of oil to determine the ideal time to buy if you want to exchange USD for CAD. The currency pair is nearly always grouped into the volatile category, and these large jumps have contributed a lot towards the popularity of the GBP/USD. But remember, with greater volatility comes greater risk, making it important to set stops and limits to protect your trades. Different pairs will be better to trade at different times of day.