Forex, or foreign exchange, is the market where traders buy and sell different currencies. The forex market is the largest and most liquid market in the world, with an average daily turnover of around $5 trillion. There are many different currencies traded in the forex market, but not all currencies are created equal. In fact, there are 8 major forex pairs that are the most widely traded in the market. In this article, we’ll explain what the 8 major forex pairs are and why they are important.
1. EUR/USD
The EUR/USD pair is the most widely traded forex pair in the world. It represents the exchange rate between the euro and the US dollar. The euro is the currency of the European Union, while the US dollar is the currency of the United States. This pair is popular among traders because it is highly liquid and has a low spread. The euro and the US dollar are also two of the most important currencies in the world, so their exchange rate is closely watched by traders and investors.
2. USD/JPY
The USD/JPY pair represents the exchange rate between the US dollar and the Japanese yen. The Japanese yen is the currency of Japan, which is one of the world’s largest economies. This pair is popular because of the volatility of the Japanese yen and the stability of the US dollar. It is also popular among carry traders, who borrow money in US dollars to invest in Japanese assets.
3. GBP/USD
The GBP/USD pair represents the exchange rate between the British pound and the US dollar. The British pound is the currency of the United Kingdom, which is one of the largest economies in Europe. This pair is popular because of the volatility of the British pound, which is often affected by political and economic events in the UK. The US dollar is also a safe-haven currency, so this pair is often used as a hedge against riskier assets.
4. USD/CHF
The USD/CHF pair represents the exchange rate between the US dollar and the Swiss franc. The Swiss franc is considered to be one of the safest currencies in the world, which makes this pair popular among traders looking for a safe-haven currency. The Swiss franc is also closely tied to the euro, which means that this pair is often affected by events in the eurozone.
5. AUD/USD
The AUD/USD pair represents the exchange rate between the Australian dollar and the US dollar. Australia is a major exporter of commodities, such as coal and iron ore, so this pair is often affected by changes in commodity prices. The Australian dollar is also considered to be a high-yielding currency, which makes it popular among carry traders.
6. USD/CAD
The USD/CAD pair represents the exchange rate between the US dollar and the Canadian dollar. Canada is a major exporter of oil, so this pair is often affected by changes in oil prices. The Canadian dollar is also closely tied to the US economy, which means that this pair is often affected by events in the United States.
7. NZD/USD
The NZD/USD pair represents the exchange rate between the New Zealand dollar and the US dollar. New Zealand is a major exporter of dairy products and wool, so this pair is often affected by changes in commodity prices. The New Zealand dollar is also considered to be a high-yielding currency, which makes it popular among carry traders.
8. EUR/GBP
The EUR/GBP pair represents the exchange rate between the euro and the British pound. This pair is popular among traders looking to trade the euro against a currency that is closely tied to the European economy. It is also affected by political and economic events in the UK and the eurozone.
In conclusion, the 8 major forex pairs are the most widely traded currency pairs in the forex market. They are popular among traders because of their liquidity, volatility, and importance in the global economy. Traders should be aware of the factors that affect each pair and use technical and fundamental analysis to make informed trading decisions.
