Trading the Major Currencies

As you may already know, Forex is traded in pairs.  Within the vast number of currency pairs available to trade on the Forex market, there are some pairs that are much more commonly traded than others.  Those pairs which are most often traded are referred to as “The Majors”.  Different experts refer to varying numbers of major pairs but the consensus seems to be that any of the most popular currencies, when paired with the USD is considered a major pair.

The major pairs are the ones with the lowest spreads and the most liquidity. The lower spreads are a good indicator to let you know the liquidity of the currency.  These pairs account for a tremendous percentage of all Forex trading, all over the world.  In fact, the EUR/USD pair accounts for almost 30% of all Forex trading daily.  The US dollar is the most used currency in the world since the US has the largest economy in the world.  That makes the USD the currency that is in the most demand, which is why it is the base of the major currency pairs.

 

Trading the Major Currencies

Here is a list of the Major Currency Pairs in Forex Trading

EUR/USD  Euro/United States Dollar

USD/JPY   United States/Japanese Yen

GBP/USD  British Pound/United States Dollar

USD/CAD United States Dollar /Canadian Dollar

USD/CHF United States Dollar/Swiss Franc

AUD/USD Australian Dollar/United States Dollar

NZD/USD New Zealand Dollar/United States Dollar

Any significant financial news from the US will affect the prices of these currency pairs.  It is very important for any Forex trader to be aware of these changes because they will affect the entire Forex market, and the majors most significantly.

The Euro encompasses a large number of different economies and which makes it a significant player in the Forex market.  The third most traded currency in the world is the Japanese Yen.  It is the most popular currency in the Asian market.  The bank of Japan charges basically no interest so the Yen is extremely popular among borrowers and then it is exchanged for other, high yielding currencies.

The next most popular currency in the world market is the British Pound.  Even though England has been part of the Euro Zone, the British Pound remains the currency used there.  The government retains more control of the currency this way.  Crude Oil and Natural Gas are the strongest backers of the Pound so when the prices of those products fluctuate, so does the value of the GBP.  The moves are usually much larger in the GBP/USD pair than that of the EUR/USD.

The CAD, NZD and AUD are all commodity based currencies.  This means that the value of these currencies is directly related to the value of the commodities they are connected to.  The prices move with the prices of oil and gold.  The other currencies we have discussed are more often held by governments and banks and less connected to the commodities markets.

 

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