Most Tradable Forex Currency Pairs

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

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

The are also 7 major currency pairs that are called the 'Majors' and include the US Dollar against EUR, JPY, GBP, CHF, CAD, AUD, and NZD.

These are some of the most tradable Forex currency pairs.

 

The Euro (EUR) against the United States dollar (USD)

EUR/USD, or else 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 areas in the world. The USD is the most traded currency in the Forex market, and the Euro is the second. Therefore, EUR/USD is by far the most traded Forex pair worldwide. Commercial banks, insurance firms, investment companies, and individual traders are all major buyers and sellers of EUR/USD. Due to the depth of the market and liquidity, EUR/USD is traded in very tight spreads (tighter spreads than any other asset in our financial universe).

The dynamics of EUR/USD are highly influenced by:

(i) the level of interest rates between the EU and the US, and

(ii) the political conditions in the Eurozone

These 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 to GBPUSD (positive correlation between +0.8 and +0.9)
  • Both currencies (EUR, USD) are commonly used as reserve currencies by global central banks
  • The best time to buy EUR/USD occurs in December, and the best time to sell EUR/USD occurs in January

 

The British Pound Sterling (GBP) against the United States dollar (USD)

GBPUSD is charcterized by tight spreads, high volatility, large swings, and correlation to EURUSD

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 financial center worldwide and a very important player in the Forex market. On the other hand, the US Dollar is the most traded currency in the world, involved in about 85% of all currency transactions.

GBP/USD is a relatively high-volatile pair characterized by very fast and very strong swings of 2,000 pips, or even more.

These are some key facts about GBPUSD:

  • 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 to EUR/USD (positive correlation between +0.8 and +0.9)
  • Both currencies (GBP, USD) are commonly used as Reserve Currencies by global central banks
  • GBPUSD is one of the top choices of day traders and scalpers

 

The United States dollar (USD) against the Japanese Yen (JPY)

Long and strong trends, very tight spreads, and common 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)

The USDJPY is of the three most important currency pairs in the world, along with EURUSD and GBPUSD. USD/JPY is the 2nd most-traded currency pair, representing about 15% of all Forex trading activity. USDJPY is commonly used by day traders and scalpers as it is very liquid and provides tight trading spreads.

The USD and the JPY are also the 1st and 5th most-held reserve currencies worldwide:

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

USDJPY Correlation to the US Stock Markets in Six (6) Steps

Interestingly, USDJPY is highly correlated to the US stock markets. This is a short explanation of this phenomenon:

-1- When investors are willing to buy US stocks, they tend to borrow in Japanese Yen (because of the tight JPY interest rates)

-2- Therefore, they are borrowing capital in JPY, and then selling JPY to buy USD

-3- That causes short-term demand for USD and selling pressure for JPY

-4- When investors are selling US stocks, they close their Japanese Yen borrowing liabilities

-5- Therefore, they are selling USD to buy back JPY and repay their loans

-6- That causes an increased demand for JPY and selling pressure for USD

From time to time, the dynamics of that simple mechanism can determine the USDJPY short-term exchange rate.

Find more: » Correlation Between USDJPY and Stock Indices

These are some key facts about USDJPY:

  • The US Dollar is involved in about 85% of all currency transactions
  • The Japanese Yen is involved in about 19% of all currency transactions
  • In terms of GDP, the US economy is the largest in the world, and Japan’s economy is the 4th largest in the world
  • Japan is the 2nd largest creditor of the United States, after China
  • Japan's Public Debt / GDP is one of the greatest in the world
  • Japan's currency reserves ($1.26 trillion) are the second largest in the world, after China
  • Often interventions in the USDJPY market by the Bank of Japan (BoJ)

 

 

The United States dollar (USD) against the Swiss franc (CHF)

Competitive spreads, limited volatility but large swings, correlation to US Trasury 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 in the world, and the Swiss Franc is the sixth most-traded currency in the world.

The Swiss economy is one of the strongest and most reliable economies, and the Swiss Franc is considered a classic reserve currency. During times when the global economy is facing turmoils, the CHF is often seen as a 'safe heaven' for currency investors.

It is very interesting that although the Swiss Franc is one of the hardest currencies in the world, nearly 70% of the Swiss GDP represents exports. The CHF is the official currency not only of Switzerland, but also of Lichtenstein, and Campione d'Italia.

These are some key facts about USDCHF:

  • The US Dollar is involved in about 85% of all currency transactions
  • Swiss France is involved in about 6.5% of all currency transactions
  • Both currencies are highly used as Reserve Currencies by global central banks
  • The USD/CHF shows a correlation to the US Treasury Bill (more: » The Correlation of US Bonds Yields to USDCHF)

 

The Euro (EUR) against the British Pound Sterling (GBP)

EUR/GBP is characterized by strong long-term trends and fair spreads. It is considered the 5th Major allthough it is a Forex Cross.

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 5th major pair (the others are EUR/USD, GBP/USD, USD/JPY, and USD/CHF). The euro is the second most important reserve currency in the world, and the British pound sterling is the third.

The pair enjoys high liquidity and large trading volume. EUR/GBP is traditionally offered in fair spreads and that makes it a good choice for day trading and scalping Forex.

These 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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