When it comes to forex trading, the major currency is usually combined with other popular currency.
Because prices in these forex currency pairs move in tight bands most of the time, these make them volatile.
What are the Major Forex Pairs?
There are different opinions on which currencies should be in the list of major currencies.
But there are four major traditional currencies, which are USD/JPY, USD/CHF, EUR/USD, and GBP/USD.
Some commodity currencies are considered the most traded currencies against the USD. These currencies are NZD/USD, AUD/USD, and USD/CAD.
In the list of most traded currencies, these seven are the most mentioned, but some traders also include some other key currency pairings, which in most cases don’t feature the US dollar.
This type of pairing is known as cross currencies. These are some of the currencies traded in cross currency pairs EUR/CHF, GBP/EUR, and EUR/JPY.
Major Currency Pairs
Major currency pairs also represent some of the major economies in the world, and they are usually traded in high volumes. These because higher volumes mean smaller spreads.
The most traded currency pairs are the EUR/USD and its nicknamed fiber. Over 23% of forex transactions in 2016 were EUR/USD, the world’s most traded currency that year.
Because EUR/USD is very popular, it has tight spreads. Because of the high volume, there is a reduction in the bid and offer price.
The USD/JPY is the second most traded currency pair, and it is known as the ninja.
For some traders, they prefer to borrow the Yen and invest it in also currencies that has the potential of yielding a higher return.
For many years the Bank of Japan had to battle with low growth and inflation; this resulted in having a low-interest rate.
For many traders, Yen serves as a safe-haven currency. Because of the undersea cables that are used to carry quotes across the Atlantic ocean, the GBP/USD is nicknamed cable.
One of the similarities between these two major currencies is that they are both highly correlated. Thanks to the united kingdom’s economy, which is tied to the European Union.
Because of the GBP/USD high liquidity, most traders now enjoy its tight bid and ask spreads.
Conclusion
The USD/CHF is another major currency; the swiss francs are believed to be a safe-haven, and because of that is was nicknamed swissy.
Because the Swiss economy has lower risk, most traders prefer to bid upward when volatility or risk enters the forex market.
Major currency pairs are one thing every trader should know when trading forex.
The good news here is that learning from the basics is simple. And every currency pairs are quoted in the same way.
Be it from the most popular ones to the most exotic pairs.
