Most Tradable Forex Currency Pairs

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A currency pair, or exchange rate, is a quotation of two different currencies (e.g., EURUSD). The first currency listed (e.g., EUR) is called the base currency, and the second (e.g., USD) is the quote currency.

■ There are 8 major currencies: United States Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Swiss Franc (CHF), Canadian Dollar (CAD), Australian Dollar (AUD), and New Zealand Dollar (NZD).

■ There are also 7 major currency pairs, known as the ‘Majors,’ which pair the US Dollar against EUR, JPY, GBP, CHF, CAD, AUD, and NZD.

These are some of the most actively traded Forex currency pairs.

EUR/USD, also known as the Fiber, is by far the most traded Forex pair worldwide.

■ Forex Pair: The Euro (EUR) against the United States Dollar (USD)

■ Forex Slang: FIBER

■ Central Banks: ECB (» visit) against the FED (» visit)

■ Currency Reserves: $762 billion (ECB) against $121 billion (US)

■ Population: 510 million (EU) against 319 million (US)

■ GDP: $17,100 billion (EU) against $23,300 billion (US)

■ DEBT/GDP: 93.0% (EU) against 123.4% (US)

The European Union (EU) and the United States of America are the two largest economic regions in the world. The USD is the most traded currency in the Forex market, with the Euro ranking second. As a result, EUR/USD is by far the most traded Forex pair worldwide. Commercial banks, insurance companies, investment firms, and individual traders are all major buyers and sellers of EUR/USD. Due to the market’s depth and liquidity, EUR/USD trades with very tight spreads—tighter than any other asset in the financial world.

The dynamics of EUR/USD are strongly influenced by:

(i) the interest rate differentials between the EU and the US, and

(ii) political conditions in the Eurozone.

Here are some key facts about EUR/USD:

The Euro is involved in about 39% of all currency transactions.
The US Dollar is involved in about 85% of all currency transactions.
EUR/USD is highly correlated with GBP/USD, with a positive correlation between +0.8 and +0.9.
Both the Euro and US Dollar are widely used as reserve currencies by global central banks.
The best time to buy EUR/USD is in December, while the best time to sell is in January.

GBP/USD is characterized by tight spreads, high volatility, large swings, and a strong correlation with EUR/USD.

■ Forex Pair: The British Pound Sterling (GBP) against the United States dollar (USD)

■ Forex Slang: CABLE

■ Central Banks: BoE (» visit) against the FED (» visit)

■ Currency Reserves: $164 billion (UK) against $121 billion (US)

■ Population: 63.7 million (UK) against 319 million (US)

■ GDP: $3,130 billion (UK) against $23,300 billion (US)

■ DEBT/GDP: 101% (UK) against 123.4% (US)

GBP/USD is one of the most heavily traded Forex pairs in the market. The United Kingdom is a leading global financial center and an important player in the Forex market. Meanwhile, the US Dollar is the most traded currency worldwide, involved in about 85% of all currency transactions.

GBP/USD is a relatively volatile pair, characterized by rapid and strong swings of 2,000 pips or more.

Here are some key facts about GBP/USD:

The British Pound is involved in about 13% of all currency transactions.
The US Dollar is involved in about 85% of all currency transactions.
GBP/USD is highly correlated with EUR/USD, with a positive correlation between +0.8 and +0.9.
Both the British Pound and US Dollar are widely used as reserve currencies by global central banks.
GBP/USD is a popular choice among day traders and scalpers.

Long and strong trends, very tight spreads, and frequent Bank of Japan currency interventions.

■ Forex Pair: The United States dollar (USD) against the Japanese Yen (JPY)

■ Forex Slang: YEN

■ Central Banks: FED (» visit) against the BoJ (» visit)

■ Currency Reserves: $121 billion (US) against $1,263 billion (JAPAN)

■ Population: 319 million (US) against 127 million (JAPAN)

■ GDP: $23,300 billion (US) against $4,940 billion (JAPAN)

■ DEBT/GDP: 123.4% (US) against 264.0% (JAPAN)

USD/JPY is one of the three most important currency pairs globally, alongside EUR/USD and GBP/USD. It is the second most traded pair, accounting for about 15% of all Forex trading activity. USD/JPY is popular among day traders and scalpers due to its high liquidity and tight trading spreads.

The USD and JPY are the first and fifth most-held reserve currencies worldwide:

USD accounts for approximately 62.0% of total global reserves.
JPY accounts for approximately 4.0% of total global reserves.

USD/JPY Correlation to the US Stock Markets in Six Steps

Interestingly, USD/JPY is highly correlated with the US stock markets. Here is a brief explanation of this phenomenon:

When investors buy US stocks, they often borrow in Japanese Yen because of JPY’s low interest rates.
They borrow capital in JPY and sell JPY to buy USD.
This creates short-term demand for USD and selling pressure on JPY.
When investors sell US stocks, they close their JPY borrowing positions.
They sell USD to buy back JPY and repay their loans.
This increases demand for JPY and selling pressure on USD.

This mechanism often influences the short-term exchange rate of USD/JPY.

Here are some key facts about USD/JPY:

The US Dollar is involved in about 85% of all currency transactions.
The Japanese Yen is involved in about 19% of all currency transactions.
The US has the largest economy by GDP, and Japan ranks fourth.
Japan is the second-largest creditor of the United States, after China.
Japan’s public debt-to-GDP ratio is one of the highest in the world.
Japan’s currency reserves ($1.26 trillion) are the second-largest globally, after China.
The Bank of Japan (BoJ) frequently intervenes in the USD/JPY market.

Competitive spreads, limited volatility with occasional large swings, and correlation to US Treasury bills.

■ Forex Pair: The United States dollar (USD) against the Swiss franc (CHF)

■ Forex Slang: SWISSY

■ FED (» visit) against the SNB (» visit)

■ Currency Reserves: $121 billion (US) against $649 billion (SWISS)

■ Population: 319 million (US) against 8 million (SWISS)

■ GDP: $23,300 billion (US) against $800 billion (SWISS)

■ DEBT/GDP: 123.3% (US) against 41.4% (SWISS)

USD/CHF is one of the four Forex majors, along with EUR/USD, GBP/USD, and USD/JPY. The US Dollar is the most traded currency worldwide, while the Swiss Franc ranks sixth in global currency trading.

The Swiss economy is among the strongest and most reliable, and the Swiss Franc is considered a classic reserve currency. During times of global economic turmoil, the CHF is often viewed as a “safe haven” for currency investors.

Interestingly, although the Swiss Franc is one of the strongest currencies globally, nearly 70% of Switzerland’s GDP comes from exports. The CHF is the official currency not only of Switzerland but also of Liechtenstein and Campione d’Italia.

Here are some key facts about USD/CHF:
- The US Dollar is involved in about 85% of all currency transactions.
- The Swiss Franc is involved in about 6.5% of all currency transactions.
- Both currencies are widely used as reserve currencies by global central banks.
- USD/CHF shows a correlation to the US Treasury bill. (more: » The Correlation of US Bonds Yields to USDCHF)

EUR/GBP is characterized by strong long-term trends and reasonable spreads. Although it is a Forex cross, it is considered the fifth major pair.

■ Forex Pair: The Euro (EUR) against the British Pound Sterling (GBP)

■ Forex Slang: CHUNNEL

■ Central Banks: ECB (» visit) against the BoE (» visit)

■ Currency Reserves: $762 billion (ECB) against $164 billion (UK)

■ Population: 510 million (EU) against 63.7 million (UK)

■ GDP: $17,100 billion (EU) against $3,130 billion (UK)

■ DEBT/GDP: 93.0% (EU) against 101% (UK)

Although EUR/GBP is a Forex cross, it is considered the fifth major pair (the others are EUR/USD, GBP/USD, USD/JPY, and USD/CHF). The Euro is the second most important reserve currency worldwide, while the British Pound Sterling ranks third.

The pair benefits from high liquidity and large trading volume. EUR/GBP typically offers fair spreads, making it a good choice for day trading and scalping.

Here are some key facts about EUR/GBP:

The Euro is involved in about 39% of all currency transactions.
The British Pound is involved in about 13% of all currency transactions.
Both currencies are used as reserve currencies by global central banks.

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