Forex Major Currency Pairs: The 7 Most Profitable in 2022 (Pros and Cons)

The Best Forex Major Currency Pairs

Karim Yousfi

Experienced trader & analyst

A.Karim Yousfi is a experienced trader and analyst. He is managing a team of 5,000 traders at Audacity Capital London Trading Floor.

Major currency pairs are usually found in forex trading, and it involves buying and selling of currencies. They are typically done in pairs, and each currency is defined by its ISO currency code. For example, US dollars is USD, Canadian dollars is CAD, and so on. This article will help you understand more about currency pairs, how they work, what affects their prices, and more.

 

What Are Forex Major Currency Pairs?

Currency pairs involve two currencies, whereby one is a quotation of the other. In short, one currency is compared to another currency. The first currency is usually known as the base currency, and the second one is the quote currency. If, for instance, you pick EUR/USD. The EUR is the base currency, and the USD is the quote currency.

So, if the quote for EUR against USD is 1.13, it means that 1 EUR can be changed for 1.13 USD. The rates of every currency are usually not constant. They keep changing. The EUR can appreciate while the USD depreciates or vice versa.

How Do Forex Currency Pair Work?

Many people don’t understand how major currency pairs work, but it usually involves buying and selling currencies. The Forex market is never dormant as the currencies keep moving, and that is both the base and quote currencies. The Euro may weaken against the US dollar or strengthen against the USD. This allows traders to sell or buy to make profits depending on the lots they purchase.

For example, if the quote for EUR against the USD is 1.3560, it means that to buy one unit of the EUR, you will have to pay 1.3560 USD. If you want to sell, you will receive 1.3560 US dollars.

Now, a trader may only want to buy the EUR/USD pair if he believes that the EUR will appreciate against the US dollar, also known as going long. The trader can also sell the EUR/USD pair (going short) if he believes that Euro will depreciate.

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How do you know when to buy or sell currency pairs?

The major currency pairs take up to 75% of the entire forex trades, but you should note that not all currencies have the same liquidity. The liquid ones are easier to trade than those that are not majorly used because they have the majority of buyers and sellers.

Also, know that any currency without the USD is known as the cross pair. They may include; EUR/GBP, EUR/CHF or EUR/JPY.

The Best Forex Major Currency Pairs

There are seven major currency pairs traded globally, and all have nicknames. Traders choose them depending on their trades in the forex market. But generally, four currency pairs are never missed out. This is because they are traded in huge volumes and represent the world’s biggest economies. They include:

EUR/USD: The Euro and US dollar

The EUR/USD currency pair has a positive correlation with the GBP/USD and a negative correlation with the USD/CHF. The euro, the British pound, and the Swiss franc all have a positive correlation.

USD/JPY: The US dollar and Japanese Yen

The USD/JPY has generally been the second most commonly traded pair. Political tensions between the United States and the Far East have been a source of concern for this pair. Because the US dollar is the base currency in all three pairings, the pair tends to be favourably connected with USD/CHF and USD/CAD.

GBP/USD: The British pound sterling and US dollar

The GBP/USD pair has a positive connection with the EUR/USD and a negative correlation with the USD/CHF. This is because the British pound, Swiss franc, and euro all have a positive correlation.

USD/CHF: The US dollar and Swiss Franc

USD / CHF is the currency pair made up of US dollars and Swiss francs. The currency pair shows how many Swiss francs (the quote currency) it takes to buy one US dollar (the base currency). Trading the USD / CHF currency pair is also known as “Swissie” trading.

AUD/CAD: The Australian dollar and Canadian dollar

The AUD / USD currency pair tends to have a negative correlation with the USD / CAD, USD / CHF, and USD / JPY pairs, as the US dollar is the quoted currency in these cases. The correlation with USD / CAD is also due to the fact that both the Canadian and Australian dollars have a positive correlation with each other, as they are both commodity block currencies.

NZD/USD: The New Zealand dollar and US dollar

NZD / USD. The value of the NZD / USD pair is reported as 1 NZ dollar for every X US dollar. For example, if the pair is trading at 1.50, it means that $ 1.50 would be needed to buy NZ $ 1.

USD/CAD: The US dollar and Canadian dollar

Because the US dollar is the quote currency in these other pairs, the USD/CAD currency pair has a negative correlation with the AUD/USD, GBP/USD, and EUR/USD currency pairs.

What Affects Forex Currency Pairs?

Traders always follow the market to know which major currency pairs they should pick. This is because the prices are usually affected by factors such as:

Politics

Corruption, trade wars and elections usually cause instability, which affects the forex market significantly. Politics is a huge factor in forex trading because governments can affect the economy, which may lead to appreciation or depreciation of currency values.

Interest rates

Traders are always looking for higher yields, and that is why financial stability is crucial. They must keep checking whether interest rates are rising in the central banks.

Economic Data

Economic data is another factor, and traders must always follow this to know how a nation performs. Economic data may include inflation, employment data, GDP, etc.

Our Tips To Trade With Major Currency Pairs

If you are a beginner, choose liquid currency pairs until you know how the pairs move. Also, select the best trading time, leverage, and follow the news to understand how the currencies are affected.

When you trade with major currency pairs, we recommend you to:

  • Develop your trading abilities and skills .
  • Define your objectives and trading style.
  • Chose a good Trading Platform and a good Broker
  • Choose a Methodology That Is Consistent and stick to it.
  • Determine the points of entry and exit and respect them.
  • Calculate Your Probability and have proper risk management
  • Always take Small Losses and make sure to understand why you lost.
  • Conduct a weekend analysis and prepare for your week.
  • Maintain a Paper Record and Journal

What Are The Benefits Of Trading Major Currency Pairs?

Because there are so many buyers and sellers trying to make a trade at any given time, Forex is the most liquid market in the world. Individuals, organisations, and institutions convert nearly $6 trillion dollars of cash every day, roughly double the annual British gross domestic product (GDP).

Because of forex’s great liquidity, transactions may be executed quickly and efficiently, and spreads are often quite tight, implying that the underlying market price does not need to move significantly in order for your trade to be profitable.

What Are The Forex Major Currency Pairs With The Most Pips?

A pip is the last decimal place to which a certain currency rate is commonly quoted (percentage in point). In normal market conditions, several online forex providers often quote no more than a set 1-point spread between the bid and offer on major currency pairs and liquid cross rates.

Currency traders frequently seek out currency pairs with the greatest pip values, as they are particularly effective for short-term techniques like day trading. Each pip’s value is determined by your lot size and the currency you’re dealing. Pips can also be used to calculate how much leverage a trader can employ when trading foreign currencies.

The four traditional majors

Each of the four traditional main currencies is profiled here, along with the factors that influence their price changes. It’s important to note that the most popular currency pairs by trading volume aren’t necessarily classified as majors. The four majors, on the other hand, are the market’s most traditionally popular currency pairs. For example, the AUD/USD currency pair is currently the fourth most traded in the world, but it is not one of the four traditional majors.

The euro and US dollar: EUR/USD
The US dollar and Japanese yen: USD/JPY
The British pound sterling and US dollar: GBP/USD
The US dollar and Swiss franc: USD/CHF

Cross currencies

The term “cross currency pairs” refers to currency pairs that do not include the US dollar. These pairs aren’t included in some traders’ collections of major currencies. However, for the sake of this post, we will look at some of the cross currencies that are occasionally classified as majors. The following are some examples of popular cross currency pairs:

GBP/EUR
EUR/CHF
EUR/JPY

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Frequently Asked Questions About Forex Currency Pairs

  • What currency pairs should you trade?

    The EUR / USD is actually the best currency to trade, its the most liquid and cheap to trade and most of the moves are quite logical in a way, the EURUSD currency pair often has a negative correlation with USD / CHF and a positive correlation with GBP / USD. This is due to the positive relationship between the euro, the British pound, and the Swiss franc.

  • What is the easiest currency pairs to trade?

    There is technically no easy pair to trade, if you have proper strategy with proper risk management all pairs will be easy to trade.

  • What is the hardest and riskiest currency pair to trade?

    USDJPY as Political tensions between the United States and the Far East have been a source of concern USDJPY. Because the US dollar is the base currency in all three pairings, the pair tends to be favourably correlated with USD/CHF and USD/CAD.

  • How many currency pairs should I trade with at the same time?

    Taking in consideration the intermaket analysis could be a good tool to manage and hedge your risk, if you try to be everywhere and trade everything you are going to be nowhere so we advise you to start with no more than 3 pairs and master them properly, as much as you spend time watching and analysing specific pair you will develop a good understanding of the market action and movement of the pair.

  • Which currency pairs are most profitable in forex today?

    The world’s most traded currencies originate from a variety of continents and represent some of the world’s most powerful economies. Major forex pairs, as well as “safe haven” currencies and currencies with historically solid trade linkages, are among them.

    EUR/USD.
    USD/JPY:
    Trading the “Gopher” GBP/USD:
    Trading the “Cable” AUD/USD:
    Trading the “Aussie” USD/CAD:
    Trading the “Loonie” USD/CNY:
    Trading the Yuan.

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