Didyou know that only 7 currency pairs make up for about 75% of all forex trades? Infact, given the way these 7 major currency pairs relate to one another, theyplay a very important role on their own; a role that some traders occasionallyfail to understand.
Whilesome currency pairs are safe havens, others will have correlations with milkprices or iron ore and coal.
Theintricacies of the forex market are often complex but they’re the reason somany traders love forextrading and what makes it so incredibly rewarding.
Assuch, let’s take a look at the top 7 currency pairs, how they shape up tradingsessions all across the world, and how they can turn yours into a profitablecurrency trading experience.
EUR/USD
Whenyou combine the Euro with the US Dollar, given that they stem from two of theworld’s most powerful economies to no one’s surprise, you get the top tradedcurrency pair.
Thiscurrency pair is well known for its high liquidity and incredibly large volumesof trade which is why it is widely considered to be prime forex scalpers’territory.
TheEUR/USD stability ensures that earnings are frequent albeit rather smaller thanwhen trading other currency pairs.
GBP/USD
Ifthe EUR/USD is the most popular trading pair, the GBP/USD is referred to as the“cable” (the precursor to the fiber optics cable), but that surely doesn’t meanthat the currency pair has in any way lost its importance.
Infact, the GBP/USD tends to be seen as a highly volatile pair given how commonfluctuations in price, pip movements, and exchange rates tend to be, meaningtechnical analysis is a must for those willing to venture into it.
Accordingly,given these price fluctuations, the GBP/USD is usually disputed by both day andswing traders.
EUR/GBP
Commonlyreferred to as the “Chunnel” (as in channel + tunnel connecting themgeographically), the EUR/GBP was widely considered to be a strong pair due tohow interconnected the two regions are in terms of trade and often policy.
However,Brexit shook things up and the currency pair now sees more volatility, meaninga higher skill level is necessary to trade it, so remember to bring yourtechnical analysis a-game for this one.
USD/JPY
Givenhow the Japanese yen is prominent across Asia, this currency pair is one of themost popular ones in the world.
TheUSD/JPY is known for its high liquidity, something which means that largevolumes won’t affect the price too much in terms of its exchange rate.
Moreover,spreads are usually seen as the tightest in the market, meaning trading coststend to be low.
USD/CHF
Thiscurrency pair is known for being a bastion of financial stability, a safe havenfor investors, which is why it earned the endearing term: the “Swissie”.
Traderstend to flock towards the Swiss Franc in times of high volatility, meaning thatin times of turmoil, or political or economic uncertainty, you will probablysee the USD/CHF becoming an increasingly popular choice amongst traders.
Onthe flip side, the USD/CHF stability also means that once markets face lowvolatility you won’t see a lot of action going on here.
AUD/USD
Knownas the “Aussie”, the AUD/USD is known for its negative correlation with theUSD/CHF and USD/JPY.
Australiais a massive exporter of coal and iron ore, meaning its economy is heavilyreliant on commodities trading.
Accordingly,you’ll find that the price of the Australian Dollar will be very dependent oncommodity prices so keep an eye out for those if you’re planning to trade thisone.
NZD/USD
Aslong as we’re looking at the economy down under, let’s skip ahead to NewZealand.
Thiscurrency pair is known as the “Kiwi” and just as Australia depends oncommodities, a big part of New Zealand’s strength comes from its tourismindustry and dairy industry.
Thismeans that for trading NZD you might need to keep a close eye on milk prices asNew Zealand is the single highest exporter of milk (and it’s not even close).Accordingly, if milk is on the rise, the NZD will likely chase that priceaction upwards.
USD/CAD
Commonlyreferred to as the “Loonie”, the USD/CAD sees itself as incredibly dependent oncommodity prices.
Canada’seconomy is big on natural gas, oil reserves, and timber.
Giventhe USA and Canada’s geographical proximity, their shared trading volume andtariffs are two things to closely monitor when trading this currency pair.
Wrappingup: the advantages of trading the “major 7” forex pairs
It’sone thing to understand how currency trading works, but it takes time to fullygrasp how currency pairs work.
Whiletrading the major 7, you’re bound to be met with large trading volumes, so ifyou’re using the right currency trading platforms you’ll get tighter spreads,meaning you can enter or exit a position at any given moment.
Moreover,their added versatility primes them to be traded at any time, night, or day, soyou can trade on your schedule.
Andfor those who have never engaged in any form of currency trading, no two pairsare the same but with the major 7, you can at least count on stability, meaningthat there’s little chance you’ll be met with sudden fluctuations.
Currencyin Forex moves fascinatingly, and if you want to figure it out, all you have todo is look at the right places.
