Forex Major Currency Pairs

Now that we have discussed how to trade Forex and how to profit from the currency price movement, you must feel eager to start trading right away, right? However, later you will realize that there are so many currencies available on the list, and they all seem to offer promising results. Now, which one should you pick?

Of course, the answer is to choose the currency pairs that will give you the best possible profits in a much shorter time than the others. Therefore, as a new trader, it is highly recommended that you start with the Forex major currency pairs.

So, what are these major currency pairs, and why is it highly recommended to start with them?

Understanding Forex Currency Pairs

Since it is almost impossible to exactly count currencies, the value of a currency is always measured in comparison to another currency. After all, when you exchange currencies, you are selling and buying two different currencies at the same time; that is why they are called currency pairs or Forex pairs.

Essentially, calculating currency pairs works the same way as when you see a price in a foreign currency market and you immediately calculate it in your head in relation to your country’s currency.

That is precisely how the currency is valued in the Forex market. You count the value of one currency in comparison to another currency.

As a result of this mechanism, when the price of a currency pair moves, it means the relative value of that currency decreases or increases compared to that of another. For example, the EUR/USD price goes up from EUR/USD 1.10 to EUR/USD 1.15. In this case, the perceived value of EUR has increased compared to USD, and the relative value of USD has decreased compared to EUR at the same time. Therefore, you cannot pay only 1.10 USD to buy 1 EUR. You need more, and that’s about 1.15 USD.

In international markets, there are currency pairs that move faster and in larger volumes compared to the rest. These fast-moving currencies are called Forex major currency pairs.

What are the major/main Forex pairs?

Major currency pairs are traded more frequently and in a far greater volume than the other currency pairs. From government contracts and commodity trading to banking purposes, these currency pairs drive the markets and, in some cases, become the foundation of the world economy.

Some people say that there are 8 major currency pairs, while others think there are 7 or 9. However, the most important currency pairs are as follows:

These major currency pairs consist of the five most traded currencies in the world, namely the US Dollar, Euro, Japanese Yen, British Pound, and Swiss Franc.

So, you can imagine how much money is involved and how fast it is moving, not only in the Forex market but practically in almost any market that is a part of the world’s economy.

1. EUR/USD

The EUR/USD pair consists of the two most-traded currencies in the world, i.e., the Euro and US Dollar. Some traders nickname this pair as the “Fiber.” This pair dominates over 20% of the total currency traded in the Forex market. After all, the EUR/USD represents two giant parties in the world’s economy; that is to say, the United States and the European Union.

New traders are recommended to trade in this pair because of its massive volume and much tighter spreads. This pair will enable them to enter and exit trades more easily because there is no need to worry about drastic price differences.

2. USD/JPY

At a distant second, we have the USD/JPY, pairing the US Dollar and the Japanese Yen. According to some traders, this pair is called the “Ninja.”

The Japanese Yen has faced so many hardships in its battle with low inflation and growth over the years, which resulted in an extremely low-interest rate. That is why the JPY is massively used by the carry traders. They borrow the Yen and then use it to invest in higher-yielding currencies.

The USD/JPY is also highly recommended to new traders because of its tremendously high volume. As a result, the USD/JPY pair has high liquidity in the market, but with low BID/ASK spreads. On top of that, most traders believe that JPY is a safe currency due to its near-zero interest rates and a stable economy.

3. GBP/USD

The GBP/USD pair, or the “Cable,” was once the world’s most traded currency pair in the mid-19th century. The GBP was the most dominant currency at that time, and all transactions done during that period were carried out using the transatlantic cable. Hence, the name “Cable.”

Similar to EUR/USD, GBP/USD is considered as one of the major currency pairs because the economy of the United Kingdom is closely attached to the European Union. Besides, this pair is traded in high volumes, which results in high market liquidity. That is why GBP/USD is a highly recommended currency pair for new traders.

4. USD/CHF

Last but not least, we have the USD/CHF that matches the US Dollar with the Swiss Franc, or “Swissy.” The CHF stands for “Confoederatio Helvetica Franc.” This currency pair is the fourth largest currency pair traded in the financial markets.

Most traders favor trading in CHF in high market volatility due to Switzerland’s stable economy. Switzerland is listed as one of the wealthiest countries in the world with extremely high GDP statistics. As a result, when the market is moving in a discouraging direction, traders tend to turn to CHF. That is why this currency pair is also recommended to new traders.

Commodity Currency Pairs

Aside from the above major currency pairs, there are several other important currency pairs called the commodity currency pairs. Some traders consider these commodity pairs as “major” currency pairs. That is because when commodity prices are skyrocketing, their trading volumes may exceed the USD/CHF or even GBP/USD.

In addition, the price of commodity currencies is greatly influenced by commodity prices. Therefore, the price fluctuation of these currency pairs is far greater than the 4 major currency pairs.

Below you can find some of the important commodity currency pairs:

1. AUD/USD

AUD/USD is known as the “Aussie,” and pairs the Australian Dollar with the US Dollar. The price of this currency pair is highly affected by mining, price of beef, wool, and wheat. Moreover, China plays a big part in determining the price fluctuation of AUS/USD since the country has a close business relationship with Australia.

2. USD/CAD

The USD/CAD or the “Loonie” pairs the US Dollar and the Canadian Dollar because they are closely related in terms of economy. The price of this currency pair is greatly influenced by oil, timber, and natural gas.

3. NZD/USD

New Zealand (NZD) is the world’s biggest whole milk powder exporter. Gold plays an important role in New Zealand’s economy in which interest rates are higher than in many other countries. As a result, some traders take advantage of interest rates to earn more profits.

Why Trade with Major Currency Pairs?

The answer is simple, because of their volume.

The major pairs - and sometimes the commodity pairs - have the highest traded volume in the markets worldwide. From government contracts, as well as businesses between banks and corporations, to money exchanges, the major pairs dominate the Forex market in massive amounts compared to other currency pairs.

So, why is volume so important?

High volume tends to increase exponentially. Why? Because as the spreads between the BID and ASK prices get tighter, more traders are drawn to these currencies. When more traders keep the trading volume at a higher level, this results in tighter and more stable spreads compared to other currency pairs.

On top of everything, high volume means high liquidity. As a result, traders can enter and exit trades with no worries. They can move money in large amounts without causing too much disruption in the existing market prices. And people are more prone to buying and selling major currency pairs regardless of the time, so chances of slippage are much lower.

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