Forex or foreign exchange is a decentralized global market where currencies are traded. It is the largest financial market in the world with an average daily trading volume of $5.3 trillion. Forex trading involves buying and selling currency pairs, and these pairs are categorized into major, minor, and exotic pairs. The major forex pairs are the most traded currency pairs and are considered the backbone of the forex market. In this article, we will discuss the 6 major forex pairs in detail.
1. EUR/USD (Euro/US Dollar)
The EUR/USD currency pair is the most traded forex pair in the world, accounting for approximately 28% of the total daily forex trading volume. It represents the value of the euro against the US dollar. The euro is the currency of the European Union, while the US dollar is the currency of the United States of America. The EUR/USD pair is highly liquid, and traders can easily buy or sell the pair at any time.
The EUR/USD pair is affected by various economic indicators, such as inflation rates, interest rates, and GDP figures. The European Central Bank (ECB) and the Federal Reserve (Fed) are the two central banks that influence the value of this currency pair. The EUR/USD pair is also affected by geopolitical events, such as Brexit and the US-China trade war.
2. USD/JPY (US Dollar/Japanese Yen)
The USD/JPY currency pair represents the value of the US dollar against the Japanese yen. It is the second most traded forex pair, accounting for approximately 13% of the total daily forex trading volume. The Japanese yen is considered a safe-haven currency, and the USD/JPY pair is often used as a barometer of risk sentiment in the financial markets.
The USD/JPY pair is affected by various economic indicators, such as inflation rates, interest rates, and GDP figures. The Bank of Japan (BOJ) and the Federal Reserve (Fed) are the two central banks that influence the value of this currency pair. The USD/JPY pair is also affected by geopolitical events, such as tensions between the US and North Korea.
3. GBP/USD (British Pound/US Dollar)
The GBP/USD currency pair represents the value of the British pound against the US dollar. It is the third most traded forex pair, accounting for approximately 9% of the total daily forex trading volume. The British pound is the currency of the United Kingdom, while the US dollar is the currency of the United States of America.
The GBP/USD pair is affected by various economic indicators, such as inflation rates, interest rates, and GDP figures. The Bank of England (BOE) and the Federal Reserve (Fed) are the two central banks that influence the value of this currency pair. The GBP/USD pair is also affected by geopolitical events, such as Brexit.
4. USD/CHF (US Dollar/Swiss Franc)
The USD/CHF currency pair represents the value of the US dollar against the Swiss franc. It is the fourth most traded forex pair, accounting for approximately 5% of the total daily forex trading volume. The Swiss franc is considered a safe-haven currency, and the USD/CHF pair is often used as a barometer of risk sentiment in the financial markets.
The USD/CHF pair is affected by various economic indicators, such as inflation rates, interest rates, and GDP figures. The Swiss National Bank (SNB) and the Federal Reserve (Fed) are the two central banks that influence the value of this currency pair. The USD/CHF pair is also affected by geopolitical events, such as tensions between the US and China.
5. USD/CAD (US Dollar/Canadian Dollar)
The USD/CAD currency pair represents the value of the US dollar against the Canadian dollar. It is the fifth most traded forex pair, accounting for approximately 4% of the total daily forex trading volume. The Canadian dollar is often referred to as the “loonie” because of the image of a loon on the one-dollar coin.
The USD/CAD pair is affected by various economic indicators, such as inflation rates, interest rates, and GDP figures. The Bank of Canada (BOC) and the Federal Reserve (Fed) are the two central banks that influence the value of this currency pair. The USD/CAD pair is also affected by geopolitical events, such as tensions between the US and Iran.
6. AUD/USD (Australian Dollar/US Dollar)
The AUD/USD currency pair represents the value of the Australian dollar against the US dollar. It is the sixth most traded forex pair, accounting for approximately 3% of the total daily forex trading volume. The Australian dollar is often referred to as the “aussie.”
The AUD/USD pair is affected by various economic indicators, such as inflation rates, interest rates, and GDP figures. The Reserve Bank of Australia (RBA) and the Federal Reserve (Fed) are the two central banks that influence the value of this currency pair. The AUD/USD pair is also affected by geopolitical events, such as tensions between the US and China.
In conclusion, the 6 major forex pairs are the EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, and AUD/USD. These pairs are the most traded currency pairs in the forex market and are considered the backbone of the market. Traders should be aware of the various economic indicators and geopolitical events that affect these currency pairs to make informed trading decisions.
