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If you’re a forex trader or wish to exchange one currency with another, you should know the major currency pairs. The major currency pairs comprise a large percentage of forex transactions worldwide. Forex major pairs, apart from contributing so much to transactions, are also significant in speculation.
Knowing the rates of the major currency pairs allows you to see when a particular currency rises compared to another. The significance they have in trading allows for some smart investment decisions and some useful knowledge. Here, we will talk about the major currency pairs, what they are, and their main specifications.
What Are Major Currency Pairs?
Major currency pairs are the four most traded pairs. Forex traders buy and sell these currency pairs in large volumes. The major currency pairs are part of the Group of Ten currency group and are popular among speculators and traders.
Some people think that these currency pairs determine the direction of the forex market. The four major currency pairs are:
EUR/USD
USD/JPY
GBP/USD
USD/CHF
Major currency pairs are those pairs that include the US Dollar, as it is seen as the largest economy in the world. As a result, major currency pairs have small spreads and attract more traders, which leads to higher volume.
Top 7 Major Currency Pairs
Although most people see the four pairs listed above as the major currencies, some people think that other pairs, such as AUD/USD, CAD/USD and NZD/USD, also count as major currencies. We will look at 7 major currency pairs.
1. EUR/USD
The EUR/USD currency pair tells you how many US Dollars you need to buy a Euro. The EUR/USD consists of two of the largest economies in the world, so the currency is quite popular among traders. It leads the forex major pairs and is the most traded currency in the world. The EUR/USD also trades large volumes.
Biggest Currency Pairs by Volume
2. USD/JPY
The USD/JPY currency pair tells you how many Japanese Yen you need to buy a US Dollar. The USD/JPY is another frequently traded currency pair, coming second to EUR/USD. The USD/JPY rate is a benchmark for the performance of the Asian economy.
3. GBP/USD
The GBP/USD rate shows how many US Dollars are needed to buy a British pound. An old currency pair, the GBP/USD, is widely used and frequently traded all over the world.
4. USD/CHF
Known as the “Swissie,” the USD/CHF rate tells you how many Swiss Francs you need to buy a US Dollar. Switzerland is a popular location to keep cash due to its prioritization of privacy while conducting banking operations.
5. AUD/USD
Another frequently traded currency pair, the AUD/USD, tells you US Dollars you need to buy one Australian Dollar.
6. USD/CAD
Another major currency pair, the USD/CAD pair, tells you how many Canadian Dollars you need to buy one US Dollar.
7.NZD/USD
The NZD/USD is a popular pair since the USD is the top currency in the world, and the NZD comes in the top ten. It tells you how many US Dollars you need to buy an NZ Dollar.
What Determines the Price of Major Currency Pairs?
Interest rates are the central determinant of the prices of currency pairs. When central banks increase interest rates, the demand for the currency increases as traders feel they can get higher yields. When the demand for the currency increases, the price of the currency also increases. Hence, fluctuations in the interest rate often determine the exchange rate of major currencies.
Inflation
Inflation also determines the exchange rate of a currency pair. This happens when the general price level of one country rises or falls as compared to another. Depending on the direction, the exchange rate will either increase or decrease. In the case of major currency pairs, inflation in an economy that is part of a pair may affect the price of the forex major pair.
Political Stability
Forex traders and investors know that political instability creates uncertainty and fluctuations in the exchange rates. Therefore, when a country has a large number of political scandals, investors will demand the currency less, depreciating the exchange rate. When this happens to an economy such as the US, the prices of the major currency pairs fall.
Economy
The economic data and the performance of the economy may also affect the price of the major currency pair. For example, a country with a decent GDP and a good trading policy is attractive to investors. If such a country is part of a currency pair, the price of the pair will rise.
Speculation
When people buy and sell currencies, the value of the currency changes. Speculators often demand more high-value currency to make a profit. When speculators buy more of a currency, its value rises. This is what happens to major currency pairs.
Macroeconomic Data
Inflation and interest rates are just two of the macroeconomic factors that impact the price of major currency pairs. Other variables may also change the price. These include:
Current Account
A current account deficit means that the country is spending more and earning less. This causes depreciation, decreasing the rate of the major currency pair.
Purchasing Price Parity (PPP)
If the price of a good in one country does not equal that in another country, the law of purchasing power parity is violated. This will change interest rates and relative prices, which may have an impact on the exchange rate.
Terms of Trade
The ratio of exports to imports determines the revenue of an economy. Higher revenue means higher demand for a country’s currency. This leads to a higher exchange rate.
Debt
The amount of government debt may also influence the rate of major currencies. If word of government debt spreads, foreign investors will sell their bonds, depreciating the exchange rate.
Forex Data Calendar
Economic calendar on Admiral Markets
As mentioned, certain factors may lead to changes in the rate of major currency pairs. With Admiral Markets’ calendar, you can keep track of financial details and worldwide events. This information will help you to make trading decisions.
To customize the calendar to get what you want, you need to follow these simple steps:
Step 1: Go to the navigation bar on the top left and select the region you want.
Step 2: Go to the navigation bar on the top right and choose your preferred language.
Step 3: Right under the region and language bars, you will see two rectangles with dates on them. You can change those dates to access the information in your desired time span.
Step 4: Press on the blue button labeled “Filter” and customize the countries you want to see.
Step 5: Read the data using the labels. “Time” shows the time the news was published, “Country” shows the affected currency, “Impact” shows how the news may impact the market, and “Event” shows the name of the event.
Step 6: Interpret the data. Published data differing from actual data means volatility, and the impact section shows how much the volatility is.
Why Traders Choose Forex Majors
Most forex traders use a major currency pair, which shows in the trading volumes of the currencies. The reasons they choose major currency pairs include volatility, size, and slippage.
Volatility:High trading volume leads to low volatility. Therefore, major currency pairs have low volatility. Most traders want low volatility because there is less risk, making it perfect for beginners.
Average daily volatility of majors
Volume:The more volume a currency pair has, the narrower the spreads tend to be. This attracts many traders, which in turn keeps the volume high.
Size:Major currency pairs have large volumes, which makes it easy for forex traders to enter and exit. The traders may often have larger position sizes because of this.
Slippage:Another advantage the high volume brings is that it lowers the chance of slippage or it reduces the amount of the slippage.
Major vs. Exotic Pairs Trading
Exotic pairs consist of one major currency and one currency of a developing country. Examples of exotic pairs include:
EUR/TRY
USD/HKD
NZD/SGD
AUD/MXN
Liquidity
Spreads
Volume
Risk
Leverage
Major Pairs
High
Low
6.37%-27.95%
High
High
Exotic Pairs
Low
High
Low
Medium
Low
Best Forex Brokers in 2024
Every forex trader needs a trustworthy and efficient forex broker for assistance in trading. However, you need to make sure your forex broker meets all of your needs and suits you. Some of the best forex brokers in 2023 include AvaTrade, FxPro, and XM.
Many people consider AvaTrade to be the best trading app. AvaTrade is one of the top forex brokers for several reasons. It offers copy trading, automated platforms, and useful trading features. AvaTrade will assist you throughout your trading process, even providing you with market analysis videos.
AvaTrade also prioritizes security by providing SSL encryption.
Commission
$0
Trading Platform
MT4
Typical spread
0.9 pips for EUR/USD
Trading opportunities
55 Forex pairs, 26 commodities, and 23 indices
On AvaTrade, you can trade with FX, crypto, and CFDs. Their customer service is multilingual, and their regulation is in 6 jurisdictions.
FxPro is a low-risk broker you can use to trade forex and CFDs. Its regulations are in tier-1 and tier-2 jurisdictions. The platform has a trust score of 89/99. You can find market analysis and updates on FxPro’s blog alongside useful content on their YouTube channel.
You can access your trading dashboard on the client portal, where you will have access to sentiment data, forex pairs, and an economic calendar.
Commission
$0
Trading Platform
MetaTrader suite, cTrader, Gallery
Typical spread
1.58 for EUR/USD
Trading opportunities
Cryptocurrency, CFDs, Copy trading
FxPro even has mobile platforms powered by the same providers. These platforms are similar to web-based ones and function equally well.
Though FxPro does not have the best prices, its trustworthiness and efficiency make it a good choice.
XM is a broker that stands out for its educational content. Though it struggles to compete with industry leaders, it puts up a strong front in this area. XM has a score of 84/99. XM offers the full Meta Trader suite alongside relevant indicators. The platform provides a good market research package and impressive features.
On FXPro, you can buy EUR/USD in MetaTrader by following a few simple steps.
Step 1: Go to your FxPro MT4 Platform. Look for the “Order” button. You can do this by right-clicking on the instrument you want in the Market Watch window or clicking on “New Order.”
Step 2: In the Order window, set the symbol and parameters of the volume of EUR/USD you wish to order. For currencies, 1.0 means 1 lot, which equates to 100,000 units of currency.
Step 3: Set your “stop-loss” or “take profit” rates by changing the numbers in the relevant boxes.
Step 4: On MT4 Market, click on “Sell by market” or “buy by market.”
Click “Ok.”
Summary
Major currency pairs are widely used currencies with high volumes, low spreads, and low volatility. They comprise most economic transactions and speculations. These currency pairs determine the direction of the foreign exchange market and attract traders, keeping their volume high. Forex majors include the US Dollar.
Apart from major forex pairs, you can opt for exotic pairs, but those have low liquidity, high spreads, and high volatility. You can keep track of important economic events or financial information through an Admiral Markets Calendar. If you want to start trading, you can choose one of the best brokers of 2023 to begin.
FAQs
What Is The Most Heavily Traded Currency Pair?
The EUR/USD is the most heavily traded currency pair as it includes two of the biggest economies in the world. This currency pair has the highest volume and attracts many traders.
What Is The World’s Weakest Currency?
The Iranian Rial is the world’s weakest currency. This is primarily because Iran is sanctioned by the USA for oil exportation.
What Is The Safest Currency To Own?
The Norwegian krone and the Singaporean Dollar are the two safest currencies to own. This is because Norway has no debt, so the currency is safe.
What Are The 5 Major Currencies?
The five major currencies are the US Dollar, the British pound, the Japanese Yen, the British pound, and the Swiss Franc. These are the most traded currencies as of 2024.
Mikhail Vnuchkov joined Traders Union as an author in 2020. He began his professional career as a journalist-observer at a small online financial publication, where he covered global economic events and discussed their impact on the segment of financial investment, including investor income. With five years of experience in finance, Mikhail joined Traders Union team, where he is in charge of forming the pool of latest news for traders, who trade stocks, cryptocurrencies, Forex instruments and fixed income.
The area of responsibility of Mikhail includes covering the news of currency and stock markets, fact checking, updating and editing the content published on the Traders Union website. He successfully analyzes complex financial issues and explains their meaning in simple and understandable language for ordinary people. Mikhail generates content that provides full contact with the readers.
Mikhail’s motto: Learn something new and share your experience – never stop!
Olga Shendetskaya has been a part of the Traders Union team as an author, editor and proofreader since 2017. Since 2020, Shendetskaya has been the assistant chief editor of the website of Traders Union, an international association of traders. She has over 10 years of experience of working with economic and financial texts. In the period of 2017-2020, Olga has worked as a journalist and editor of laftNews news agency, economic and financial news sections. At the moment, Olga is a part of the team of top industry experts involved in creation of educational articles in finance and investment, overseeing their writing and publication on the Traders Union website.
Olga has extensive experience in writing and editing articles about the specifics of working in the Forex market, cryptocurrency market, stock exchanges and also in the segment of financial investment in general. This level of expertise allows Olga to create unique and comprehensive articles, describing complex investment mechanisms in a simple and accessible way for traders of any level.
Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.
