Major And Minor Currency Pairs

 

In this article, we are going to discuss major and minor currency pairs that you can trade with CFI. In the forex market, a currency pair expresses the value of one currency relative to another currency.

 

A major currency pair is a set of currencies from large, strong economies, and when one of the currencies in the pair is the US dollar. Major currency pairs are the most dominant currency pairs in the forex market, and they experience the biggest trade volumes. They are characterized by:

•High trade volumes

•Tight spreads

•High liquidity

•Lower volatility

Major currency pairs are divided into traditional majors and commodity currencies.

Traditional Majors

The traditional majors are made up of the US dollar paired with the euro, the Japanese yen, the Great British pound, and the Swiss franc. Let’s take a look at these major currency pairs and how they react in the market.

Without a doubt, the euro paired against the US dollar is the most popular currency pair and the most heavily traded in the world. This pair, supported by the world’s strongest economies, has low volatility, tight spreads and reacts to most of the major news from both the European Central Bank and the US Federal Reserve.

The US dollar paired against the Japanese yen is the second most traded currency pair, nicknamed theGopher

The yen is a popular currency for carry-trade, and traders use this pair for the buy low, sell hightrading strategy, in order to benefit from its interest rate differentials with the USD due to low interest rates in Japan. Many investors want to regularly convert their local currencies into the yen because Japan is one of the biggest exporters in the world. The yen is also considered to be a safe-haven currency, meaning it can stay stable or even appreciate during uncertain economic conditions.

The Great British pound, paired with the US dollar, has been nicknamed the “Cable”. It is the third most widely traded pair. It becomes more liquid during the overlap in the London and New York trading sessions, which occurs at 14:00 GMT.

The US Dollar paired against the Swiss franc is commonly referred to as the “Swissie”. The CHF is a safe-haven currency because it tends to appreciate in relation to the USD during uncertain and extremely volatile global market conditions. This pair is also influenced by the differences in interest rates between the Swiss National Bank and the US Federal Reserve.

 

Commodity Currencies

Commodity currencies are currencies from countries whose economies rely on certain commodities such as natural gas, precious metals, oil, dairy products, and timber, among others. These are the Australian dollar, the Canadian dollar, and the New Zealand dollar. When paired with the US dollar, they form another kind of major currency pair.

The Australian dollar paired against the US dollar is commonly referred to as the “Aussie” and it is a major commodity pair. The Australian economy is driven by commodities such as iron ore and coal, and the price of AUD depends highly on the prices of these commodities.

The US dollar paired against the Canadian dollar is a popular commodity pair commonly referred to as the “Loonie”. The Canadian economy relies heavily on the commodities oil, natural gas, and timber, and the prices of these commodities in turn influences the value of the CAD.

The New Zealand dollar paired against the US dollar is nicknamed the “Kiwi”, after a flightless bird native to New Zealand. New Zealand’s economy is driven by the tourism industry and the dairy market: when milk prices and tourism are thriving, the NZD tends to appreciate.

 

A minor currency pair is a pair of currencies from large, strong economies that does not include the US dollar. The most popular and most traded minor currency pairs include the pound, the euro, and the yen because, besides the US dollar, these are the three most traded currencies. Minor currency pairs are characterized by:

•Smaller market share compared to major pairs

•Lower market liquidity compared to major pairs

•Wider forex spreads compared to major pairs

The Euro (EUR)

The euro is the second most held reserve currency, and the second most traded in the world. It accounts for up to 31% of daily trading volume in the market. It has maintained the status of being a major reserve currency since its introduction in 1999. An example of a minor currency pair with the euro is EUR/GBP.

The Japanese Yen (JPY)

This is the fourth most held reserve currency, and the third most traded in the forex market, accounting for almost 22% of the daily trading volume. The JPY is traded as a reserve currency because it remains stable during turbulent market times. An example of a minor pair with the yen is EUR/JPY.

The Great British Pound (GBP)

This is the third most held reserve currency, and the fourth most traded in the forex market, accounting for approximately 13% of daily trade volume. An example of a minor currency pair with the pound would be EUR/GBP.

The most commonly traded minor currency pairs that you can trade with CFI are

•Euro/British pound (EUR/GBP)

•British pound/Canadian dollar (GBP/CAD)

•Swiss franc/Japanese yen (CHF/JPY)

•Euro/Australian dollar (EUR/AUD)

•New Zealand dollar/Japanese yen (NZD/JPY)

•British pound/Japanese yen (GBP/JPY)

As you can see, major currencies are divided into traditional majors and commodity currencies. The four most popular and most traded currencies that you can trade with CFI are the US dollar, the euro, the Japanese yen, and the Great British pound. You can also spice up your trading strategy by adding some commodity currencies and minor currency pairs into your trading plan.

 

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

The Client agrees the Company provides execution only services and that any information, reports, opinions, commentary or other materials received from the Company directly or from its employees or through any analytical tools provided or third party research provided from the Company shall not be deemed as investment advice and it cannot be relied upon to make investment decisions. The Client commits to make their own research and from external sources as well to make any investment. The Client accepts the Company will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The contents of this document should not be construed as an express or implied promise, as a guarantee or implication that clients will profit from the strategies herein, or as a guarantee that losses in connection therewith can, or will be limited.