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Best currency pairs to trade

Best currency pairs to trade

2021-03-23 • Updated

Information is not investment advice

In this article, you’ll know which currency pairs are the most popular among traders, and what every trader should know about them.  

EUR/USD: traders’ bestie

EUR/USD is the most traded pair in the Forex market for several reasons. First of all, the euro and the US dollar are the currencies of the two most powerful world regions. Almost every day, these countries publish their economic indicators which impact EUR/USD, some more, some less. 

If Euro Area unveils data that is better than analysts’ forecasts, EUR/USD rises. If worse – EUR/USD falls. The same logic works for the US data. The better-than-expected US data will drive the USD up and EUR/USD down (as USD is a quote currency). 

Besides, the EUR/USD pair may be driven by significant political news such as elections, trade agreements, and tensions between countries. The Federal Reserve and the European Central Bank are the major central banks, which interventions into the economy trigger big moves in the Forex market. To know how to trade on central banks’ decisions, read our article “How to trade on central bank decisions?

USD/JPY: battle of two titans

Both the US dollar and the Japanese yen are safe-haven currencies. By the way, there are two types of currencies: risk (the AUD, the NZD, the GBP) and safe-haven (the USD, the JPY, and the CHF). Safe-haven assets tend to rise in times of economic instability and uncertainty, while risk currencies – in times of economic growth and prosperity. We must admit that USD/JPY is not as volatile as EUR/USD. The biggest liquidity is when European and USA market sessions overlap from 14:00 MT time (GMT+2) till 18:00 MT time (GMT+2). 

GBP/USD, EUR/GBP: Your Highness pound

The British pound sterling (GBP) is the official currency of the United Kingdom. The GBP is the third most-traded currency after the USD and the EUR. Interesting fact: although the UK was an official part of the EU for some time, the UK has never switched to the euro. 

As you may know, the GBP was hugely influenced by Brexit in 2020. The long and bumpy period of negotiations between the UK and the EU caused big swings of GBP/USD and EUR/GBP. Since the Brexit deal is over, GBP/USD has all chances to rally up to fresh highs. 

USD/CAD: oil-dependent loonie

The main feature of the Canadian dollar is its high dependency on oil prices as Canada is one of the largest oil exporters in the world. The CAD tends to surge when oil prices are rising, and on the opposite, falling oil prices drive the CAD down. By the way, the Canadian dollar is also called ‘loonie’ because of the appearance of a loon (a North American bird) on the back of the Canadian dollar coin.

AUD/USD: sunny aussie

The Australian dollar is seen by many traders as a risk asset. It usually rises when the overall market sentiment is risk-on. That’s why the aussie (the short word for the AUD) positively correlates with stocks. Besides, Australia is closely connected with China due to the geographical location. Therefore, when China publishes some economic data, not only the Chinese yuan is influenced, but also the Australian dollar.

That’s it! Hope you’ve found something new and interesting for you! Use this knowledge to your advantage!

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