Appreciating the eight major currency pairs is essential if you hope to enjoy Forex success so that this article will look at the most traded currencies.
Are you interested to learn more about buying and selling currency pairs? What does the phrase “CAD to pound” mean? As these topics and principles are mostly the cornerstones of the Forex sector. It is critical to appreciate the principles behind such trades. Generally, this begins with acknowledging the eight major currency pairs as well as the importance of each.
What are the 8 Major Currency Pairs?
We will now take a quick look at some of the most traded currencies, and for the sake of this article, each will get abbreviated with a series of pair nicknames. Let’s now examine what each has in store as well as what makes specific relationships significant in terms of Forex trading.
Many investors consider this to represent the main currency trading pair due to the sheer global recognition of each currency. It is also important to note that currently, the United States dollar is the number one currency in terms of the sheer trading volume. Thus, it stands to reason that many investors will look at the USD/EUR relationship daily.
Another one of the eight major currency pairs to mention. As the abbreviation suggests, the value of the United States dollar is pegged against the Japanese yen. Like many denominations listed in this article, the yen is one of the G10 currencies. It can, therefore, represent a benchmark in terms of global economic health.
The British pound sterling (GBP) and the United States dollar is one of the major pairs within Forex trading. Not only does this involve the volume of each that changes hands daily, but it arises from the fact that both countries enjoy strong economic ties to one another. The values of these “majors” will often be leveraged against one another since the pound is historically stronger than the dollar.
Often referred to as the “dollar swissy”, the CHF is another currency traded against the United States dollar. Out of the eight major currency pairs listed in this article, this pair is one of the most conservative. Because the value of the Swiss franc gets not immediately tied to the EU. Thus, it can get used as a hedge in times of volatility.
While each of these eight major currency pairs listed with the dollar ($) sign, the Canadian dollar tends to be slightly weaker. Those trading American dollars may, therefore, choose to make a CAD purchase if the Canadian currency gets expected to strengthen.
The Australian dollar and the United States dollar are also commonly traded. One advantage here is that investors will be able to leverage any growth occurring in the Far East without having to become involved in other currencies such as the yen or the Chinese renminbi.
The same principle mentioned above regarding the Australian dollar is often employed when trading the NZD against the United States dollar. As the New Zealand economy is heavily based upon the prices of commodities, this is one of the eight major currency pairs which could be an ideal solution for traders who are looking to embrace a more conservative approach.
This is one of the many major Forex pairs which are often classified as “crosses“. The term “cross” is used when referring to any pair that is not pegged to the value of the United States dollar. Those who are wary about the state of the American economy or who may otherwise be looking for independent Forex currency options should consider such trades.
Why it is Important to Know Your FX Currency
From CAD to euro and from the dollar to yen, appreciating the strengths and weaknesses of the eight major currency pairs is critical if you hope to appreciate the “big picture”. Let us also mention that anyone who hopes to take advantage of the currency pair convention in terms of Forex futures contracts should be aware of how the relationship of one value will impact the other.
As you might have imagined, it usually is better to specialize in only one or two pairs. Attempting to follow broader movements between different relationships can become tricky. With time and patience, you might very well be able to enjoy an additional source of income!
Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.
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