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What are the top 5 most traded currency pairs?

What are the top 5 most traded currency pairs?

In the thrilling world of forex trading, some currency pairs are more shiny compared to others, and this influences the world’s markets. These couples are not just figures of economic superpowers; they are also the doors into the world’s trends and emotions. In this excursion, we’ll travel through the five most popular forex pairs, shedding light on their significance and searching out why they attract currency traders the world over.

The top 5 most traded Forex pairs in the world

EUR/USD (Euro/US Dollar)

Headed by the EUR/USD currency pair, which encompasses the eurozone and the United States – two of the major economies in the world. The euro and the US dollar are very liquid currencies so this pair is commonly used among traders. Some of the important variables that affect the movement of the EUR/USD exchange rate consist of the interest rate differential, economic data publications, and geopolitical incidents. Moreover, the euro’s function as a currency of destination and the US dollar’s role as the main reserve currency increase the pair’s importance.

USD/JPY (US Dollar/Japanese Yen)

The USD/JPY pair is a water world of liquidity and volatility that attracts traders from all over the globe. Japan is one of the big economies in the world and the US dollar is the main reserve currency. Thus, the pair is strongly affected by economic indices, monetary policy, and political issues of both countries. The Bank of Japan’s intervention in the forex market to control the value of the yen also increases the EUR/USD pair’s volatility.

GBP/USD (British Pound/US Dollar)

GBP/USD is a major currency pair in the forex market which is often referred to as “Cable.” It stands for the link between the British pound sterling and the US dollar, two currencies that are substantial in international trade and finance. Brexit-inspired events, monetary policy decisions by the Bank of England and the Federal Reserve and also the economic figures from both the United Kingdom and the US are the main drivers of Cable’s fluctuations.

AUD/USD (Australian Dollar/US Dollar)

Being one of the most traded currency pairs in Asia-Pacific, the AUD/USD pair represents relations between the Australian dollar as well as the US dollar. Australia’s close interrelationship with commodities like mining and exports to China makes the pair a volatile one. In addition, the Reserve Bank of Australia’s interest rates in contrast to those set by the Federal Reserve and the economic data released by both countries affect the AUD/USD exchange rate.

USD/CAD (US Dollar/Canadian Dollar)

Another currency pair on this list is the USD/CAD pair which shows the correlation between the US dollar and the Canadian dollar. Canada being one of the world’s major oil exporters and its close commercial links with the USA are among the reasons for their popularity. Indicators like the prices of oil, the Bank of Canada and Federal Reserve’s interest rates as well as developments on trade between the two countries influence the USD/CAD exchange rate.

Define Forex Pair

A forex pair is a combination of two currencies that are traded against each other in the foreign exchange market or forex. In ForeX trading, currencies are quoted in pairs as when you buy one currency, you sell another simultaneously. The base currency of the pair is the first currency, while the second currency is the quote currency or counter currency.

For instance, in EUR/USD (Euro/US Dollar), EUR will be the base currency and USD will be the quote currency. So, when you purchase EUR/USD, you are buying the same amount of euros in exchange for US dollars.

You can also read: Can I really make money with Forex?

Forex pairs are defined into three main types

Major pairs: This grouping involves the most traded currencies across the globe and includes the US dollar as just one of the currencies. For example, these include EUR/USD, USD/JPY, and GBP/USD.

Minor pairs (cross-currency pairs): They are non-dollar pairs and made of currencies of major economies. The examples are EUR/GBP, AUD/JPY, and GBP/CHF.

Exotic pairs: These particular currency pairs have one major currency and one currency from the minor or new economy. The examples are USD/TRY (US Dollar/Turkish Lira), USD/SEK (US Dollar/Swedish Krona), and EUR/TRY (Euro/Turkish Lira).

Conclusion

These top pairs among others will give you a solid foundation for success as a forex trader. Be sure to do your homework thoroughly and use conservative risk management before you begin trading.

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