Whether you’re a beginner or a seasoned trader, it’s important to understand the major currency pairs. These currencies include the USD, EUR, and AUD. They are used in many transactions, from trades between countries to purchases and sales of currency around the world.
EUR/USD
Known as the Euro dollar pair, this is one of the most popular pairs in the Forex market. It’s a trade of one euro for 1.2 US dollars. However, there are many different factors that impact the value of this currency pair. It isn’t necessarily the largest currency pair, but it’s one of the most liquid and volatile.
It is important to understand how the EUR/USD works, especially if you are trading it. The exchange rate of the euro to the dollar changes constantly. The Federal Reserve is one of the primary factors that affect the value of the dollar. If the Fed raises interest rates, this will affect the dollar’s value against the euro.
There are many different ways to make money by trading this pair. You can use technical analysis, fundamental analysis, or a combination of both. You can also trade on a swing basis.
USD/CHF
Compared to other major currency pairs, the USD/CHF pair is one of the least volatile pairs. This is mainly because of the fact that the Swiss franc is regarded as a safe haven currency.
There are several factors that influence the value of the currency pair. One of the most important is monetary policy. This is done by the Central Banks of a particular country. Central Banks also act as the lender of last resort for the banking industry during times of financial crisis.
Other factors that affect the value of the currency pair are the movements of other currencies. For instance, an uptick in risk appetite may cause a rise in the value of the USD/CHF pair. The value of the currency pair also depends on the interest rate differential between the two currencies.
USD/JPY
Traders often view the USD/JPY pair as a safe haven. This currency is often seen as an investment, particularly in countries with large trade surpluses. The pair is also closely tied to bond pricing in the respective countries. The Bank of Japan, for example, has a large influence on the pair.
The Japanese economy is heavily export driven. This has a positive effect on the Yen. It helps to deflate the currency, making exports cheaper. As a result, the Yen becomes a popular carry trade.
Historically, the USD/JPY pair has had a low range. The Bank of Japan releases important data periodically, such as interest rate statements. This data is often important in determining the currency’s value.
When the value of the USD goes up, the Japanese Yen falls. This is a good thing for the economy, because it encourages investors to look elsewhere.
AUD/USD
AUD/USD is the fourth most traded currency pair in the forex market, and one of the most volatile. Traders tend to buy when the US Dollar Index is weak, and sell when it is strong.
The two currencies are correlated in terms of interest rate differentials. When the economy is growing, the Aussie tends to gain in value. But that could change when interest rates go up in the U.S. Also, it’s worth mentioning that Australia has a huge trade surplus with China, so any significant economic drop there will also have a negative impact on the Aussie.
In addition to interest rate differentials, AUD/USD is also influenced by global commodity prices. These two factors are not always correlated, but they are important in the trading of the two currencies.
CNH
Whether you are a long-term investor or a day trader, the Chinese Yuan can be interesting to trade on the Forex. The currency has been undervalued during the trade war. However, it can appreciate if China and the United States finalize their trade deal.
Traders can gain an advantage by knowing the nuances of the currency pairs. Currency values are driven by political and economic events, so it is important to stay updated on news.
There are two main markets for the CNY: onshore and offshore. Onshore is where yuan is traded, while offshore is where exporters sell US dollars.
The yuan is regulated by the People’s Bank of China. The central bank has been intervening in the market, and trading yuan on the Forex is more volatile.