Which Forex Pairs To Trade

Which Forex Pairs To Trade – CFD is a complex tool. Leverage can cause you to lose money quickly. Check how this product works and if you can afford it at the risk of loss. CFD is a complex tool. Leverage can cause you to lose money quickly. Check how this product works and if you can afford it at the risk of loss.

Forex is the largest and most volatile market in the world with hundreds of currency combinations to choose from. To keep things simple, here are the 10 most-traded Forex pairs on the market.

Which Forex Pairs To Trade

The entries in this article are drawn from the most recent Bank of International Settlements (BIS) triennial survey conducted in April 2019.

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Currencies are always traded in pairs. This is because when you buy or sell one currency, you automatically sell or buy another. Each currency pair has a base currency and a quote currency. The base currency appears first and the quote currency is to the right of it.

The price displayed for a currency pair represents the quote currency amount you would have to spend to purchase 1 unit of the base currency.

For example, in the EUR/USD currency pair, EUR is the base currency and the dollar is the quote currency. If the quoted price is 1.2000, 1 Euro is equivalent to 1.20 US Dollars.

EUR/USD is the most traded currency pair on the market and EUR/USD trading accounted for 24.0% of daily forex trades in 2019.1 The popularity of the EUR/USD pair stems from the fact that it represents two of the world’s leading economies: European single market and USA.

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The daily hh volume of trading EUR/USD allows the pair to have a lot of liquidity, which usually results in margins. Liquidity and margin are attractive to traders because it means they can trade large volumes with little impact on the market.

The EUR/USD exchange rate is determined by several factors, including interest rates set by the European Central Bank (ECB) and the Federal Reserve (Fed). This is because the interest rate provides a better return on your initial investment. For example, if the ECB sets interest rates above the Fed, the euro will strengthen against the dollar.

The USD/JPY currency pair, also known as a ‘gopher’, consists of the US dollar and the Japanese yen. It is the second most traded forex pair on the market, accounting for 13.2% of all daily forex trades in 2019.

Like EUR/USD, USD/JPY is known for hh liquidity. This comes from the fact that the yen is the most traded currency in Asia and the US dollar is the most widely traded currency in the world.

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Like the Fed and ECB, the Bank of Japan (BoJ) sets interest rates on the Japanese economy, which in turn affects the value of the yen versus the US dollar.

The currency of this pair is the pound sterling and the US dollar. GBP/USD is colloquially referred to as ‘cable’ because of the deep-sea cable used to provide offers and quotes between London and New York. In 2019, the GBP/USD pair accounted for 9.6% of all daily Forex trades.

As with most other currency pairs, the strength of GBP/USD is due to the strength of the UK and US economies. If the UK economy is growing faster than the US, the pound is likely to strengthen against the dollar. But if the US economy is doing better than the UK economy, the opposite is true.

As with the first two most popular currency pairs on this list, the quoted GBP/USD price is affected by the respective interest rates set by the Bank of England (BoE) and the Fed. The next difference in interest rates between the pound and dollar could have a significant impact on the price of the GBP/USD currency pair.

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AUD/USD, also known as “Aussie”, stands for Australian Dollars to US Dollars. It accounted for 5.4% of daily foreign exchange transactions in 2019.

The value of the Australian dollar is closely related to its export value, and exports of metals and minerals such as iron ore and coal account for a large portion of the country’s gross domestic product (GDP).

A decline in the value of these commodities in global markets would devalue the Australian dollar. In the case of the AUD/USD currency pair, this means that the cost of the US dollar to buy 1 Australian dollar decreases as the US dollar strengthens.

Similar to the aforementioned currency pairs, the AUD/USD exchange rate is affected by the difference in interest rates between the Reserve Bank of Australia (RBA) and the US Federal Reserve. For example, if US interest rates are low, the dollar is likely to weaken against the AUD and it will cost more US dollars to buy Australian dollars.

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USD/CAD is called a ‘looney’ after the abi bird, which usually appears on Canadian dollar coins, and represents the pairing of the US dollar with the Canadian dollar. In 2019, USD/CAD trades accounted for 4.4% of daily Forex trades.

Because oil is priced in dollars on the global market, Canada earns a lot of dollars from oil exports. As oil prices rise, the Canadian dollar is likely to strengthen against the US dollar.

In general, the US dollar weakens when oil prices rise, because when the dollar weakens, more dollars must be converted into other currencies to buy the same amount of oil as before. The Canadian dollar is likely to strengthen due to its close relationship with oil prices.

Therefore, traders should keep an eye on the prices of Brent and US crude when trading USD/CAD. This is because fluctuations in the oil market are likely to be reflected in the exchange rate of this currency pair.

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The USD/CNY currency pair is a partnership between the US Dollar and the Chinese Renminbi (commonly known as the Yuan), which accounted for 4.1% of daily foreign exchange transactions in 2019.

Since the start of the US-China trade war, the yuan has depreciated significantly against the US dollar. This is partly because the Chinese government allowed the yuan to weaken, knowing that it would lower the country’s exports and already increase its exports. Significant market share outside the US.

Allows you to trade USD/CNH currency pairs. CNH is an offshore version of the yuan traded outside of China. The yuan is only referred to as CNY when traded on the mainland China market. CNH is not traditionally controlled like CNY by the Chinese government, so it could be more volatile. This volatility makes it a better choice for speculative trading.

Traders should keep an eye on the US-China trade war. This is because any circumstance can affect the price of this currency pair.

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The USD/CHF currency pair consists of the US dollar and the Swiss franc and is commonly referred to as “Switzerland”. USD/CHF is a popular currency pair because the Swiss financial system has historically served as a safe haven for investors and capital.

As a result, although traders often switch to CHF during periods of increased market volatility, the Swiss franc generally receives less interest from traders during periods of high market stability. If the CHF strengthens against the dollar after experiencing an increase in investment during a period of increasing volatility, the pair’s price is likely to decline.

CHF does not trade as actively as the previous six currency pairs on this list as it is primarily aimed at safe havens or during periods of economic volatility. However, USD/CHF accounted for 3.6% of all daily foreign exchange transactions in 2019.

USD/HKD compares Hong Kong Dollars to US Dollars. The pair’s volume more than doubled between 2016 and 2019, from 1.5% to 3.3% of all daily Forex trades.

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This increase may be due to the Hong Kong protests that dominated 2019. The protests were the result of attempts to enforce the Fugitive Crime Remediation Act and charges of police brutality against Hong Kong residents.

The protests started about a month before the data was collected, so it is likely that they affected USD/HKD trading volume. In part, this may be due to increased media rumors that have drawn many traders and speculators to Hong Kong.

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