It is inevitable that you’ll come across currencies known as “The Majors.” The term refers to the most frequently traded currencies in the world, since they are highly liquid. In addition, they are paired with the US dollars.
Below are the major currencies.
- AUD – Australian dollar
- CAD – Canadian dollar
- CHF – Swiss franc
- EUR – Euro
- GBP – Great British pound
- JPY – Japanese yen
- NZD – New Zealand dollar
- USD – United States dollar
Major Currency Pairs
EUR/USD – Fiber
EUR/USD is one the most popular currencies and the world’s most traded pair. The Eurozone and the US are the two largest economies worldwide. Therefore, this pair attracts various traders and investors alike.
The two biggest influencers of EUR/USD volatility are the Federal Reserve and the European Central Bank. For example, if the Fed raises rates, it will typically make the US dollar stronger and cause the pair to drop in value.
The overlap between the European and US trading session is the most active session. Meaning, the volatility and momentum are often very high during those times. This makes EUR/USD very attractive because of its many trading opportunities.
Read more about the most active sessions in Forex Market Hours: Best Time to Trade Currencies
USD/JPY – Safe Haven
The yen is seen as a so-called ‘safe haven’ instrument. That means, in times of uncertainty and market turmoil, traders shift from trading riskier assets to trading the yen.
However, the safe-haven flows have led to a major price increase in the yen. Since the Japanese economy depends on a cheap yen to boost their exports, the Bank of Japan has tried numerous times to bring down the yen. This results to large volatility and it’s something USD/JPY traders need to be aware of.
GBP/USD – Cable
Cable gets its name from the undersea cables that used to carry quotes across the Atlantic Ocean. Before the US dollar took over, GBP was used as the world’s reserve currency.
With the highest daily pip range, it attracts many traders. However, it’s sudden and wild price movements can easily put you off balance. Proper risk control and a stable mindset are very important when trading the GBP/USD.
GBP/USD has become even more volatile and unpredictable since the recent uncertainty in the Euro area and Brexit. This pair has a very high correlation to the USD-Index, but it correlates very little to the other markets. Being a technical pair, we recommend using technical analysis.
USD/CHF – Swissy
The CHF is the second safe haven currency because the Swiss economy and the franc are relatively stable. Like the yen, the franc also rises during times of uncertainty.
However, the Swiss National Bank is also trying to keep the currency down. It has intervened in the forex market frequently which has led to huge volatility and price spikes.
When the market volatility is low, the Swiss franc will tend to follow the movements of the euro. This is because of the close economic relationship that Switzerland has with the Eurozone.
AUD/USD – Aussie
Being a commodity pair, the AUD/USD mostly means mining, as well as farming of beef, wool, and wheat.
Furthermore, the Australian economy depends on the price of Gold since the country is a major gold producer and exporter. Therefore, the AUD/USD and Gold have a very high correlation. Always stay alert on the price of Gold because technical signals often happen simultaneously.
USD/CAD – Loonie
Canada is a major oil producer and exporter. In result, fluctuating oil prices and the Canadian dollar’s closely linked to the price of oil affect the country’s economy. If you’re active with USD/CAD, keep track of the price of crude oil.
NZD/USD – Kiwi
The keys to the New Zealand economy are agriculture, international trade, and tourism. The price movements of soft commodities will often unfold on NZD/USD.
However, the Reserve Bank of New Zealand sets interest rates that can have a major impact on the kiwi. This is most especially when they don’t line up with the Fed’s decisions.
So which are the best pairs to start trading? The best way to start is to begin with what you know.
If you are familiar with a particular economy, you may naturally prefer to trade its currency. You couple it with some strategies and practice, you’ll be on your way to become a successful forex trader.
You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!