Major Currency Pairs in Forex Market

ByMatthew Williams

At its core, Forex trading is the exchange of one currency for another at an agreed-upon price. The Forex market, with an average daily trading volume of over $6 trillion, is the biggest and most liquid financial market in the world. In this guide, we will provide a comprehensive overview of the major currency pairs in Forex trading and offer valuable insights into the strategies that can help traders succeed.

What are Major Currency Pairs?

Major currency pairs are the most commonly traded pairs in the FX market. These pairs typically involve the US dollar and one of the other major currencies, including the Euro, Japanese yen, British pound, Swiss franc, Canadian dollar, and Australian dollar. These pairs are often referred to as “majors” and are known for their high liquidity, narrow bid-ask spreads, and low volatility.

The Major Currency Pairs

 EUR/USD: The EUR/USD pair is the most heavily traded currency pair in the Forex market, accounting for roughly 30% of total trading volume. The Euro is the base currency, and the US dollar is the quote currency. This pair is sensitive to economic and political developments in the European Union and the United States.

USD/JPY: The USD/JPY pair is the second most heavily traded currency pair, representing roughly 13% of total trading volume. The US dollar is the base currency, and the Japanese yen is the quote currency. This pair is heavily influenced by the Bank of Japan’s monetary policy decisions and the economic performance of Japan and the United States.

GBP/USD: The GBP/USD pair, also known as the “cable,” is the third most heavily traded currency pair, accounting for roughly 9% of total trading volume. The British pound is the base currency, and the US dollar is the quote currency. This pair is sensitive to economic and political developments in the United Kingdom and the United States.

USD/CHF: The USD/CHF pair is the fourth most heavily traded currency pair, representing roughly 5% of total trading volume. The US dollar is the base currency, and the Swiss franc is the quote currency. This pair is influenced by the monetary policies of the Swiss National Bank and the economic performance of Switzerland and the United States.

AUD/USD: The AUD/USD pair, also known as the “aussie,” is the fifth most heavily traded currency pair, accounting for roughly 5% of total trading volume. The Australian dollar is the base currency, and the US dollar is the quote currency. This pair is influenced by the economic performance of Australia and the United States, as well as commodity prices.

 NZD/USD: The NZD/USD pair, also known as the “kiwi,” is the sixth most heavily traded currency pair, representing roughly 2% of total trading volume. The New Zealand dollar is the base currency, and the US dollar is the quote currency. This pair is influenced by the economic performance of New Zealand and the United States, as well as commodity prices.

[Suggested read: How to start forex trading ]

Trading Strategies for Major Currency Pairs

Successful Forex traders often employ a variety of strategies to capitalize on market trends and maximize profits. Here are a few common strategies for trading major currency pairs:

Trend Following: This strategy involves identifying trends in the market and opening positions in the direction of the trend. Traders may use technical indicators or chart patterns to identify trends and set stop-loss orders to limit potential losses.

Breakout Trading: This method entails locating important levels of support and resistance and placing trades when the price breaks these levels. Traders may use technical indicators or chart patterns to identify these levels and set stop-loss orders to limit potential losses.

News Trading: This strategy involves capitalizing on market volatility resulting from economic or political news announcements. Traders may use a combination of fundamental analysis and technical analysis to identify potential market-moving events and open positions accordingly.

Risk Management: Regardless of the trading strategy employed, risk management is a critical component of successful Forex trading. Traders should always use stop-loss orders to limit potential losses and should never risk more than a small percentage of their trading account on any one trade.

Conclusion

In summary, Forex trading involves the exchange of one currency for another at an agreed-upon price. The major currency pairs in the Forex market include the EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, and NZD/USD. These pairs are known for their high liquidity, narrow bid-ask spreads, and low volatility. Successful Forex traders often employ a variety of strategies, including trend following, breakout trading, and news trading. Regardless of the trading strategy employed, risk management is a critical component of successful Forex trading.

I am a content writer based in India. I am an SME business, Finance, and Trading domain and also a pro copywriter with 8 years of experience in writing for multiple industries. I have extensive knowledge of Investment, Finance, Trading, Economy, Healthcare, and IT. I also earned a master's in International Relations and a keen interest in traveling and cryptocurrencies.