Popular Forex currency pairs to trade: 10 currencies to watch for traders

Basic Understanding of Forex Currency Pairs

Forex currency pairs consist of a base currency and a quote currency, which determine their relative value. For example, in the EUR/USD pair, the euro (EUR) acts as the base currency, while the US dollar (USD) functions as the quote currency.

This setup means that an exchange rate, such as EUR/USD 1.3045, indicates that 1 euro is equivalent to 1.3045 US dollars. The exchange rates of popular forex pairs often fluctuate continuously based on economic factors, political events, and market sentiment.

Comparison Table of Major Forex Pairs

10 Forex Pairs to Watch

1. EUR/USD – Euro / US Dollar: The Heart of the Forex Market

EUR/USD is the most liquid and popular currency pair in the market. Its significance stems from reflecting global economic stability and trade relations between two major economic regions.

The policies of the European Central Bank (ECB) and the Federal Reserve (Fed) heavily influence its movements. GDP data, interest rate decisions, and employment statistics all impact this pair.

Trading Characteristics: The best times are 08:00-16:00 GMT when the London and New York sessions overlap. The average volatility is 70-90 pips per day, suitable for beginners and experienced traders.

2. USD/JPY – US Dollar / Yen: An Indicator of the Asian Market

USD/JPY reflects the relationship between the US and Japanese economies, serving as a key benchmark for the Asian market. The yen is considered a “safe haven” currency, and this pair often moves inversely to market risk sentiment.

GDP data, inflation rates, and the Bank of Japan (BoJ) policies play vital roles. The interest rate differential between the two countries is a primary factor.

Trading Characteristics: The Asian session from 23:00-03:00 GMT offers the best trading window. Volatility ranges from 50-70 pips per day, ideal for those interested in macro trends.

3. GBP/USD – British Pound / US Dollar: High Volatility

GBP/USD, known as “Cable,” has a long trading history dating back to the 19th century. It is known for high volatility and quick responses to economic and political events.

The Bank of England (BoE) policies, GDP data, and events like Brexit significantly impact this pair.

Trading Characteristics: The London-New York overlap from 08:00-16:00 GMT sees volatility of 90-110 pips per day, suitable for experienced traders who prefer short-term strategies.

4. USD/CHF – US Dollar / Swiss Franc: A Safe-Haven Currency

USD/CHF is called the “Swissy,” reflecting Switzerland’s political stability and strong financial sector. The Swiss franc is viewed as a “safe haven” currency, and this pair often moves counter to market risk sentiment.

Trading Characteristics: Good trading times are 07:00-16:00 GMT, with volatility of 50-70 pips per day, suitable for those seeking stability and risk hedging.

5. AUD/USD – Australian Dollar / US Dollar: Commodity-Linked

AUD/USD, known as “Aussie,” is closely linked to commodity prices, especially gold and iron ore. Its trade relationship with China significantly influences this pair. The Reserve Bank of Australia (RBA) policies and employment data are key factors.

Trading Characteristics: The Asian session from 00:00-04:00 GMT offers volatility of 60-80 pips per day, ideal for commodity-focused traders.

6. USD/CAD – US Dollar / Canadian Dollar: Oil-Related

USD/CAD, called the “Loonie,” is heavily influenced by crude oil prices, as Canada is a major oil exporter. Economic data and the Bank of Canada (BoC) policies are important.

Trading Characteristics: The New York session from 12:00-20:00 GMT has volatility of 60-80 pips per day, suitable for commodity market followers.

7. EUR/GBP – Euro / British Pound: European Relations

EUR/GBP reflects the relationship between the Eurozone and the UK. It is widely traded in European markets. Economic data and political events like Brexit impact this pair.

Trading Characteristics: The London session from 07:00-16:00 GMT sees volatility of 40-60 pips per day, for those interested in European trends.

8. USD/CNY – US Dollar / Chinese Yuan: Macro Relationship

USD/CNY reflects the economic relationship between the US and China, tightly controlled by the People’s Bank of China (PBoC). Chinese monetary policy, trade balance, and geopolitical tensions are key factors.

Trading Characteristics: The Asian session from 01:00-09:00 GMT offers volatility of 50-70 pips per day, suitable for emerging market traders.

9. NZD/USD – New Zealand Dollar / US Dollar: Market Opportunities

NZD/USD, known as “Kiwi,” is linked to dairy product prices, as New Zealand is a major exporter. The Reserve Bank of New Zealand (RBNZ) policies and global risk sentiment influence this pair.

Trading Characteristics: The Asian session from 00:00-04:00 GMT has volatility of 50-70 pips per day, ideal for commodity traders.

10. USD/HKD – US Dollar / Hong Kong Dollar: Currency Peg

USD/HKD is unique because the currency is pegged to the Hong Kong Monetary Authority (HKMA). This pair has lower volatility due to the fixed exchange rate system.

Trading Characteristics: The Asian session from 01:00-08:00 GMT offers volatility of 10-30 pips per day, suitable for stability-focused traders.

Techniques for Choosing Popular Forex Pairs to Trade

Popular forex pairs today exhibit diverse characteristics. Traders should consider multiple factors:

Volatility – For higher profits, choose pairs like GBP/USD or AUD/USD with greater volatility. For lower risk, select USD/HKD.

Trading Hours – Asian traders should focus on USD/JPY or AUD/USD. European traders should monitor EUR/USD and EUR/GBP.

Expertise – Beginners should start with EUR/USD for stability. Experienced traders can challenge themselves with GBP/USD or emerging market currencies.

Summary

The Forex market offers many opportunities for traders, but success depends on selecting the most traded forex pairs suitable for your strategy. Awareness of economic factors, economic news, and central bank policies is essential.

Successful traders often follow market movements, real-time economic data, and manage risk effectively. Continuous education and strategy refinement are crucial. Therefore, it is recommended to start with stable forex pairs and gradually seek new opportunities as experience grows.