Currency pairs form the backbone of the forex market, each pair consisting of a base currency and quote currency.
Price fluctuations of different currency pairs are determined by various factors, including economic news, country disputes and geopolitical events. Furthermore, certain currency pairs tend to move together.
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1. EUR/USD
EUR/USD is one of the most frequently traded forex pairs, representing the value of one euro against one US dollar. It’s heavily impacted by economic factors relating to both regions – such as interest rate settings from both central banks – as well as political events occurring within these nations which can significantly alter this pair.
Liquidity is also key, with highly liquid pairs like EUR/USD being easier for traders to buy and sell without altering their price. Furthermore, EUR/USD’s reduced volatility makes it ideal for beginners seeking to trade with low risk profiles.
Most volatile pairs require an in-depth knowledge of the fundamentals affecting them, including economic indicators like Gross Domestic Product (GDP), which measures the total output of goods and services over time. Greater understanding of GDP growth can lead to increased investor trust while its decline can signal economic instability. Furthermore, keeping abreast of ECB/Federal Reserve interest rate announcements eight times annually plays a crucial part in EUR/USD trading decisions.
2. GBP/USD
GBP/USD, commonly referred to as the “cable”, presents many trading opportunities due to its liquidity. This major pair combines UK currency with the US Dollar, providing traders with opportunities for global economic activity and events. News coming out of both nations impacts this pair heavily – particularly regarding Brexit or EU policy changes that may impact GBP/USD prices.
USD/CHF, or the Swiss Franc/US Dollar pair, is another stable pair for newcomer Forex traders to consider. Combining two well-established economies, it often acts as a safe haven during times of economic instability. When market conditions allow, it can provide lucrative pips or large jumps; but keep in mind that more profits come with greater risk.
If you’re planning to trade GBP/USD or any other pair which includes the US Dollar, keeping abreast of economic news and data from both countries (using Fusion’s economy watch as a source) is key for making sound trading decisions and avoiding volatile trends that might arise.
3. USD/JPY
Currency traders generally select currency pairs that reflect their interests and trading goals. Beginners may wish to start out trading major pairs as these provide greater stability with lower spreads than exotic pairs. Liquidity and volatility analysis play an integral part in selecting pairs – high liquidity increases chances of successful trades while low volatility reduces risks associated with sudden price movements.
The USD/JPY pair combines the currencies of two major economies – Eurozone and United States. Its movements are heavily impacted by political events such as Brexit and European Central Bank (ECB) policies as well as US economic indicators.
The Japanese Yen is widely recognized as a safe-haven currency, making its value tend to appreciate against the dollar in times of uncertainty and fear. Economic news such as natural disasters or wage growth in Japan can have an effect on its value as well. Therefore, monitoring economic calendars and following news events closely is essential for all forex traders – beginners or veteran alike – in order to anticipate market movements and avoid trading during times of high volatility; additionally they’ll stay informed on potential effects from major economic announcements on global economies or their portfolios.
4. AUD/USD
The Australian Dollar/United States Dollar exchange rate represents one currency pair combining these two. Traders can use its quotation to calculate how many US dollars are needed to buy one Australian dollar, due to Australia being the world’s leading exporter of coal and iron ore exports and China being its major trading partner whose economy affects this pair as well.
When selecting a forex pair, keep in mind your goals and risk tolerance. Day traders might prefer high liquidity with tight spreads while swing and long-term traders may prefer pairs with moderate volatility to reduce exposure risk.
Furthermore, it’s crucial that you stay abreast of economic news events that could reverberate through your trading pair of choice – such as interest rate decisions by the Federal Reserve and US unemployment and inflation data that impact USD values. Knowing when volatile periods arise can help ensure you remain ahead in your trading game.
5. NZD/USD
Beginners looking to trade currency pairs online should focus on those targeted by professional traders and financial institutions in order to minimize risk and build trading skills. It may also help avoid large losses while broadening your range. Furthermore, fundamental analysis should also be employed by beginner traders in order to understand market movements without investing correlated investments, by studying indicators like New Zealand’s Current Account Balance or US Producer Price Index in order to predict price movements in advance.
This pair allows traders to determine how many US dollars (the quote currency) are needed to buy one New Zealand dollar (the base currency). Also referred to as “The Kiwi”, this pair demonstrates commodity pricing dynamics as both currencies are driven by commodity-related global commodity prices, particularly agriculture-related ones. Furthermore, risk sentiment and US macroeconomic data such as jobless claims or interest rate decisions often have an influence over this pair. Traders should monitor regional news as well as oil prices when trading this pair.
