The AUD is sometimes referred to as the ‘Aussie’ and can be considered a commodity currency due to the heavy reliance on commodities. Predictability revolves around how much data and information is available on particular currencies. As mentioned https://1investing.in/ 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.

A lot of folks make the mistake of thinking that a minor to be any pair that doesn’t include the US dollar. Conversely, if you buy the EURUSD (also referred to as going “long”), you are buying the Euro and selling the US dollar. For example, if you sell the EURUSD (also referred to as going “short”), you are simultaneously selling the Euro and buying the US dollar. There are essentially two ways in which any currency pair can move higher or lower. As you might have guessed from its name, each pair involves two currencies. In this way, the value of one currency is compared to and is thus relative to the currency it’s paired against.

An exchange rate is the relative price of two currencies from two different countries. 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. Another popular currency pair is the Great British Pound / US Dollar combination.

The most volatile pairs during that session, pairs include the Mexican peso, Canadian, and United States dollar. The releases of measurements of national economics metrics can strongly influence the exchange rate. The currency is based on the national economy, the stronger economy, the stronger currency. ForexSignals.com takes no responsibility for loss incurred as a result of the content provided inside our Trading Room. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets. We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade.

One of the most popular safe havens is in the form of a metal rather than a currency. But contrary to popular belief, gold isn’t a great performer during economic uncertainty or even recessionary periods. During times of economic uncertainty or struggle, investors tend to favor the US dollar. So even though the Aussie was riding the gold wave at the time (which wasn’t very impressive as you’ll see below), the US dollar was strengthening at a faster pace.

Forex major currency pairs

The base currency is the actual currency that you are holding. Simply you can say that if you are trading from the United States then the currency that you are using for the trade is United States Dollar and it is your base currency. Similarly, if you are trading from any other area of the world then the currency which is being used at that place will be your base currency.

There is a relation between currency pairs, we can say that historically some currency pairs move in one direction and some in the opposite. For instance, some countries’ economies depend on the same factors or are tied closely. The currency pairs of GBP/USD and EUR/USD have a positive correlation because the British and European Union economies are closely related. Correlation can help traders to predict currency pairs further and diversify risks.

As such, you are now somewhat limited in what you can do should a favorable setup arise on a more liquid pair such as the EURUSD or the USDCAD. As you know from the currency tables above, that’s the South African rand versus the Japanese yen. It’s important to remember that there are dozens of pairs at your disposal. They are by far the most popular and therefore the most liquid. As a retail trader, all you need to know is whether you want to go long or short.

Being one of the world’s most liquid markets, Forex involves various currency pairs. However, only a handful are in high demand and are most traded. Buying a forex currency pair is pretty much like buying a stock. When purchasing stock, a person exchanges a currency, such as the U.S Dollar, for either a share of a business or a commodity. When buying a currency pair, they buy one currency in exchange for another one.

These resources combined with the massive international trade and it’s little wonder why the New Zealand dollar is affected by global commodity prices. It matters because investors tend to flock to gold during times of economic unrest. And if the Australian dollar tracks gold prices, then there’s a good chance that the Aussie will also capitulate during hard economic times. Remember that these exotics are far less popular than even the crosses, so some brokers decide that storing and updating the data simply isn’t worth their resources.

What Is a Currency Pair? Major, Minor, and Exotic Examples

Similarly, the base currency of GBPUSD is the British pound . Please ensure that you fully understand the risks involved. The performance quoted maybe before charges, which will reduce illustrated performance.

• As you know, all currency pairs are divided into several groups.
• Let’s use an example of spread betting to explain how currency pairs can be traded on, using the words buy/sell to represent long and short derivative positions.
• Therefore, the EUR/JPY pair must be somehow correlated to one or both of these other currency pairs.
• This website is owned and operated by Just Global Markets Ltd., which provides investment services.

However, the minors tend to be slightly more expensive to trade and can tend to be more volatile. Also known as the Kiwi, New Zealand is the largest exporter of dairy-based products, which means that if milk prices rise, the NZDUSD tends to follow. The global economy is dependent on the highs and lows of different country-specific currencies and their importance. For any Questions Comment below, also share by below links.

Minor Currency Pair

Experts recommend starting with some liquid currency pairs, for example, EUR/USD. The next stage is to generate as much data about the asset as possible via technical analysis and indicators. The main goal is to clarify what exactly moves the asset price. You’re probably a beginner, and you need to first learn how to read forex currency pairs. As it was said, traders need to sell one currency to buy another one. The currency pair looks like the ratio of one currency to another, like EUR/USD, GBP/USD, CAD/JPY, and others.

Yet when it comes to the Forex market, many traders forget to familiarize themselves with the currency pairs they’re buying and selling. Due to major forex pairs being the most liquid and widely traded in the world, they will likely have tighter spreads. These tighter spreads reduce one’s dealing costs, and therefore increase the margin for profit. Commodities can also have an effect on currency pair prices. Commodity currencies are those from countries that have large quantities of commodities or other natural resources. The exchange rate of the currencies of these countries are tied to their respective export activities.

What Affects the Values of Major Currency Pairs

In fact, many of the major crosses average more daily volume than some stock exchanges. To clarify, this does not mean you have to place two orders if you want Quarter on Quarter to buy or sell a currency pair. Last but not least, it’s important to remember that the relationship between the base and quote currency is always changing.

Currency Baskets (Majors, Minors and Crosses)

It is useful to get a better understanding of currency correlations and gain an insight into the relationship between currency pairs. These are all things to take into consideration when trading on currency pairs. For example, GBP/USD is the value of the British pound relative to the U.S. dollar. Traders regularly buy and sell them in an open market with minimal impact on their own international exchange rates. Aside from the three main categories of currency pairs, there are other “groups” of currencies that are thrown around in the FX world that you should be aware of. While not as frequently traded as the majors, the crosses are still pretty liquid and still provide plenty of trading opportunities.

While you can trade almost any currency pair in theory, there are certain pairs that are consistently the most traded currency pairs in the forex market. These are referred to as ‘major currency pairs’ or ‘majors’. These major pairs make up 80% of the entire trading volume in the Forex market.