Forex Major Pairs

Types Of Currency Pairs

There are four main types of forex currency pairs. These include majors, minors, crosses, and exotics.

Majors

Majors are considered the most popular currency pairs. Generally, a major currency pair includes USD and is usually more widely available to trade on the forex market, making them the most liquid. The major currency pairs are therefore the most crowded and most competitive areas in forex trading. Extensive data and price accuracy are available for majors.

Minors

Minors are slightly less common to trade than majors. Minor currency pairs do not generally include USD but they do include another major global currency, such as EUR/JPY or GBP/JPY. There is a slightly lower level of availability and liquidity with trading minor currency pairs in comparison to majors.

Crosses

Crosses are similar to minors, only they do not necessarily carry a major currency pair. Cross-currency pairs do not include USD, nor any other major global currency. In essence, minors are a subcategory of crosses.

Exotics

Exotic currencies are any global currencies that do not fall into the above categories. Exotic currency pairs typically include currencies from developing nations, small countries, or countries that are not regarded as financially powerful. Exotics can often be more volatile and usually less liquid, meaning they are often traded alongside majors.

Factors Of Trading Currency Pairs

There are several considerations to make before choosing a currency pair to trade. Although you will likely not stick to one pair, it is still worth noting some features of currency pairs.

Predictability

Predictability revolves around how much data and information is available on particular currencies. As mentioned above, major currency pairs have a greater amount of information available, including news alerts, trading patterns, and historical data. The more information available, the easier it is to predict movements and performance of the currency value.

Price Stability

Price stability typically depends on the economic health of the country whose currency you are trading. It is important to be aware of the economic health of particular nations and monitor the effects on price movements when trading their currency. Large, financially powerful countries will usually have more price stability than smaller, developing countries due to their economic strength and political power.

Liquidity

Liquidity is an extremely important factor to consider when trading forex. Liquidity essentially ensures the currency is easy to buy and sell. Currency pairs that are more widely available to trade (major currency pairs) are more liquid than other types.

Timing

The timing of your trading is also extremely important to consider. As mentioned above, the forex market is open 24/5. Depending on where you are trading from and which currency pair you are trading with, it is important to consider the relative time of day/night.

Popular Currency Pairs In The Forex Market

You can trade a wide range of currency pairs in the forex market. The following list summarises the most popular combinations to trade.

1. EUR/USD

The Euro / US Dollar is the most widely traded currency pair as it represents the two strongest major global economies. The EUR/USD is an extremely liquid currency pair and easily tradeable. Information on these two currencies is widely available and transparent. Major economic events such as the non-farm payroll, US Federal Reserve interest rates, and the European Central Bank announcements are some of the most influential events to the forex market.

2. GBP/USD

Another popular currency pair is the Great British Pound / US Dollar combination. This currency pair relies heavily on how well the respective economies are performing, as well as the interest rates set by the corresponding national banks. The GBP is sometimes labelled as the “Pound Sterling’.

3. USD/JPY

The US Dollar / Japanese Yen currency pair is extremely liquid and commonly traded as it combines the biggest global currency with the most traded currency in the Asian market. A major contributing factor to the performance and value of this currency pair is the relationship between the two nations.

4. AUD/USD

The Australian Dollar / US Dollar currency pair is a popular currency pair for forex traders looking to profit from movements in the price resulting from changes in commodity prices. Commodities such as Iron Ore, Gold, and Coal are major influences on the performance of the Australian Dollar against the US Dollar and other major global currencies. The AUD is sometimes referred to as the ‘Aussie’ and can be considered a commodity currency due to the heavy reliance on commodities.

5. EUR/GBP

The Euro / Great British Pound is the most commonly traded minor currency pair (as it does not include the US Dollar). The Euro and Great British Pound represent two major global economies and due to their close proximity and similarities in trade arrangements, it can be a difficult currency pair to trade. If you recall, Brexit (Britain’s exit from the European Union) caused a major spike in volatility of the EUR/GBP currency pair.

6. USD/CAD

The price of oil is a major influence on the US Dollar / Canadian Dollar currency pair. The reason being is that Canada relies heavily on oil as their major export and thus, their economy is impacted by the price. The US and Canada also have a close relationship, meaning trade arrangements are common. If you ever hear the term ‘Loonie’, it is referring to the CAD.

7. USD/CHF

The US Dollar / Swiss Franc currency pair is considered a safe haven investment due to the economic strength and reliability of the two currencies. The Swiss Franc in particular is a safe haven asset, as the currency is typically stable during times of economic and political turmoil. For this reason, the USD/CHF currency pair is a frequently traded combination. There is also a vast amount of data and therefore a high level of predictability on this currency pair.

8. NZD/CHF

Another commonly traded minor currency pair, the New Zealand Dollar / Swiss Franc is heavily reliant on the agricultural influence of New Zealand. Therefore, if you are trading the NZD/CHF currency pair, it is recommended to closely monitor the prices of global agricultural products. Trading the NZD/CHF currency pair is slightly more safe than the NZD/USD combination due to the stability of the CHF.

9. USD/CNY

The US Dollar / Chinese Renminbi or Yuan is a major currency pair that is heavily influenced by the US-China trade war and ongoing economic and political tension. The corresponding governments often attempt to drive prices of imports and exports higher or lower, and this has a major effect on the value of the USD/CNY. CNY can often be referred to as CNH, depending on whether it is being traded onshore or offshore.

10. USD/HKD

The final major currency pair of this list is the US Dollar / Hong Kong Dollar. This combination features a linked exchange rate that allows the HKD to fluctuate between HK$7.75/HK$7.85 to US$1.00. Once again, the relationship between the two economies is a major contributing factor to the movements in value.

Final Words On Currency Pairs

When trading forex, it is important to remember a few key points before jumping in with any currency pair. To optimise your trading, it is best to consider the time of day you are trading, long-term investing in assets or short-term scalping on CFDs, and knowledge of the currencies and corresponding financial market you are interested in. Consider all the factors discussed in this article in developing your trading strategy, as they all contribute to the performance of currencies against each other. As always, it is suggested to test your skills with a demo account before you start trading with a live account on your chosen trading platform.