Forex (the Foreign Exchange Market) ranks as the most actively traded market throughout the world. That’s where certain currency pairs stand out for various reasons – ranging from their significant liquidity, volatility, and the sheer volume of transactions.
In addition to knowing what is forex trading—you (as a trader) must be aware of some currency pairs and what makes them so lucrative—before starting out.
In this informative blog post, we’ll explore the five major Forex pairs and examine the factors that make them attractive to traders. Let’s continue to read on…
1.EUR/USD (Euro/US Dollar)
Known as the most traded currency pair globally, the EUR/USD represents the two largest economies – 1) the Eurozone and 2) the United States. Its liquidity and tight spreads make it more attractive for traders, both novice and experienced ones.
Influences are economic indicators, interest rates set by the European Central Bank and the Federal Reserve, and geopolitical events. All of which contribute to substantial price movements, providing wide-ranging trading opportunities.
2. USD/JPY (US Dollar/Japanese Yen)
The USD/JPY currency pair is well-known for its volatility, and the monetary policy decisions made by the Bank of Japan and the Federal Reserve significantly influence this pair.
Further, the Yen is frequently seen as a safe-haven asset. That’s what can serve as interesting trading patterns when the market is uncertain. This forex pair responds to economic data and global events, enabling traders to yield significant profits and gains.
3. GBP/USD (British Pound/US Dollar)
Often referred to as “Cable,” this pair is notable for its substantial price swings and the effects of economic developments in both the UK and the US.
To create explosive trading environments, factors such as Brexit negotiations, UK economic indicators, and interest rate decisions from the Bank of England contribute well.
Traders – irrespective of their expertise – are drawn to the potential for both short-term gains and long-term positions within this dynamic pair.
4. USD/CHF (US Dollar/Swiss Franc)
The USD/CHF pair is characterised by its ability to act as a barometer for global economic stability. The Swiss Franc is considered a safe-haven currency, meaning it often strengthens in times of geopolitical tension or financial instability.
The interplay between the US economy’s performance and perceptions of global risk creates a lucrative trading backdrop. So, if you’re interested in trading with this pair, you can capitalise on these movements, resulting in higher profitability.
5. AUD/USD (Australian Dollar/US Dollar)
This forex pair provides insights into the health of community markets, as Australia is a major exporter of commodities like iron ore and gold.
Fluctuations in commodity prices can significantly impact the AUD’s value, making this pair attractive for traders looking to align their strategies with global economic trends. The impact of monetary policy set by the Reserve Bank of Australia also contributes to shaping trading opportunities.
Wrapping It Up
Major Forex pairs—including all the above-mentioned—are particularly lucrative due to their high liquidity, significant volatility, and how macroeconomic factors influence their values.
Just understand the intricacies of these pairs and the market forces at play; you will get valuable opportunities for yielding profit in the ever-evolving Forex landscape.
