• Home
  • About
  • Contact

Forexobroker

Download Our Forex Strategies and Indicators

  • Strategies
  • Articles
  • Dom’s Forex Course
  • Metatrader 4 Indicators
    • Free Metatrader Indicators
    • Paid Metatrader Indicators
  • Metatrader 4 Systems
    • Free Metatrader Systems
    • Paid Metatrader Systems
  • EA’s
    • Paid Expert Advisors
  • Forex Brokers

Forex Currency Pairs – Forex Trading Education

April 21, 2015 by Dominic Walsh Leave a Comment

share

Before entering in to the topic of forex currency pair let us see how exactly the term currency is defined. Commonly currency is defined as the generally accepted form of money which includes coins and paper notes which is usually issued by the government and circulated within an economy. A currency pair is the quotation of the relative value of a currency unit against the unit of another currency in the forex market. A currency pair always consists of two currencies like NZD/USD, AUD/USD, CAD/JPY, etc. The currency which appears first is called the base currency and the second currency is called the quote currency or counter currency. The forex rate of these pair determine how much of the quote currency is required to buy one unit of the base currency.

Forex Currency Pairs

All the forex trading activity involve the simultaneous buying of one currency and selling of another but to remove the confusion one can think the currency pair itself as an instrument that can be sold and bought. If you are buying a currency pair you are actually buying the base currency and selling the quote or counter currency. This statement can be illustrated by this example – when you enter a buy position on EUR/CHF, you are buying EUR by selling CHF or simply you can say you are exchanging the euro with the Swiss franc. Let us suppose the AUD vs. CAD rate i.e.  AUD/CAD=0.9520. This means you need 0.9520 units of Canadian dollar to purchase one unit of Australian dollar and it also means that you will receive 0.9520 units of CAD when you sell a unit of Australian dollar.

Popular Currencies

Name of Country Currency Symbol Common Name Code
United States of America U.S. Dollar $ Dollar USD
Great Britain Pound £ Sterling GBP
Europe Euro € Euro EUR
Japan Yen ¥ Yen JPY
Australia Australian Dollar $ Aussie Dollar AUD
Switzerland Swiss Franc ₣ Swiss Franc CHF
Canada Canadian Dollar $ Loonie CAD
New Zealand New Zealand Dollar $ Kiwi NZD

When one talk about the foreign exchange rate there always involves two currencies.  Had there been only a single currency worldwide then there would be no such things as forex rates. Nobody says that you give me $10 and I will give you $15 in return. So, currency exchange rates exist between the two currencies. The most widely traded currency in the world are called the Major currencies they are United States dollar, Euro, Japanese yen, GBP, CAD, AUD, and the CHF.

The Major Currency Pairs

The pairs which are considered to be the most heavily traded in the forex market are called the major currency pairs. Basically the currency pairs which include US dollar are considered to be the major pairs. However, there are no any hard and fast rules for determining which the major pairs are and which aren’t. It is widely regarded that the major pairs consist of only four pairs. They are EUR/USD, USD/JPY, GBP/USD, and USD/CHF. But in this article all these seven pairs will be included. So these are the major pairs:

Currency Pair Countries Common Name
EUR/USD Euro/United States Euro dollar
GBP/USD UK/United States Pound dollar
USD/JPY United States/Japan Dollar yen
USD/CHF United States/ Switzerland Dollar swissy
USD/CAD United States/Canada Dollar cad
AUD/USD Australia/United States Aussie dollar
NZD/USD New Zealand/US New zealand dollar

So these are the pairs that are most hugely traded in the foreign exchange world. Major pairs usually have less spreads (difference between bid and ask price). The more is the currency pair traded, lesser is the spread. In the above list AUD/USD and USD/CAD are also called commodity pairs because they are the countries which supply large quantity of commodities to the world.

Cross Currency Pairs

In simple language cross currency pairs are those pairs which don’t consist of the US dollar. One may ask why to trade cross currencies. Easy answer is to grab more trading opportunities. Because these pairs are not directly related with US dollar their behavior is different than those of major pairs. If you don’t find trading opportunity within the US dollar based pairs or if they US dollar seems highly uncertain of the future moves you can simply switch to the cross currencies. Because the major pairs are highly traded they tend to have many spikes which makethe trading decision difficult. Unlike those majors crosses tend to move more smoothly.

Let us have a look at the cross currency pairs.

Yen Cross Pairs

Currency Pair Countries Common Name
EUR/JPY Euro/Japan euro yen
GBP/JPY UK/Japan pound yen
AUD/JPY Australia/Japan aussie yen
NZD/JPY New Zealand/Japan kiwi yen
CHF/JPY Switzerland/Japan swissy yen
CAD/JPY Canada/Japan cad yen

Pound Cross Pairs

Currency Pair Countries Common Name
GBP/CHF UK/Switzerland pound swissy
GBP/AUD UK/Australia pound aussie
GBP/CAD UK/Canada pound cad
GBP/NZD UK/New Zealand pound kiwi

Euro Cross Pairs

Currency Pair Countries Common Name
EUR/GBP Euro/UK euro pound
EUR/AUD Euro/Australia euro aussie
EUR/CAD Euro/Canada euro cad
EUR/CHF Euro/Switzerland euro swissy
EUR/NZD Euro/New Zealand euro kiwi

Other Cross Pairs

Currency Pair Countries Common Name
AUD/CHF Australia/Switzerland Aussie swissy
AUD/CAD Australia/Canada Aussie cad
AUD/NZD Australia/New Zealand Aussie kiwi
CAD/CHF Canada/Switzerland Cad swissy
NZD/CHF New Zealand/Switzerland Kiwi swissy
NZD/CAD New Zealand/Canada Kiwi cad

Using Forex Currency Pairs Crosses to Trade the Majors

Even if you don’t like to trade currency crosses due to various reasons you can use them to increase your trading profitability. Let us assume that you saw a sell signal for the USD/JPY and USD/CAD but you want to execute only a single trade. In such conditions you can use the currency crosses to have a better view. You can simply see the CAD/JPY cross. If the CAD/JPY is trending upward it means that CAD is stronger than the JPY so obviously you would want to sell USD/CAD rather than GBP/USD. Conversely if the CAD/JPY is trending down it means JPY is stronger than CAD so you would want to sell USD/JPY rather than USD/CAD.

Knowing the Major Currencies

The US Dollar (USD)

Nickname: Greenback or Buck

The US dollar is the mostly traded currency worldwide. The first reason is because it is the world’s primary reserve currency. Second, US dollar is a universal measure to evaluate any other currency as well as many commodities like gold and oil.

Forex Currency Pairs

In today’s world major currencies like the Euro, Great Britain Pound, Australian dollar, and New Zealand dollar, Japanese Yen, Swiss Franc and Canadian Dollar are moving against the US dollar.

The Euro (EUR)

Nickname: Single currency or Fiber

The European monetary union is the world’s largest powerful economy. The members of the Eurozone share this single currency and also the single monetary policy dictated by the ECB (European central bank). Euro is both a trade driven and a capital flow driven currency.

The Japanese Yen (JPY)

Nickname: None

Though the Japan is the third most important single economy, its currency has a much smaller international presence than the Euro or the Dollar. One of the characteristics of the yen is that it is a relatively liquid currency 24 hours. Due to the fact that most of the eastern economy moves according to the Japan, the Asian stock exchanges do have a significant impact on the Japanese currency. Japan is one of the world’s largest exporters having a consistent trade surplus. Surplus is the condition of the economy when a country’s export exceeds its imports. Demand for Yen goes up because of this trade surplus.

Great Britain Pound (GBP)

Nickname: Cable

GBP was the reference currency until the beginning of WWII, as most transactions took place in London.

Great Britain pound was the reference currency before the beginning of WWII because most of the transactions would take place in London.

London is still the largest and most developed financial market in the world having banking and finance sectors contributing to the national economical prosperity. BOE is one of the most effective central banks in today’s generation. Great Britain’s currencyis one of the four most liquid currencies in the world of forex market.

Swiss Franc (CHF)

Nickname: Swissy

Because of a lengthy history of political neutrality and a financial system known for protecting the confidentiality of its investors, have created a safe heaven reputation for Switzerland and its currency. Switzerland is the world’s largest destination of foreign capital. Swiss Franc is primarily moved by external events rather than the domestic economic situations, therefore it is sensitive to capital flows.

Canadian Dollar (CAD)

Nickname: Loonie

Canada is popular for being a resource based economy being a large producer and supplier of commodities. Canada’s major export is to the United States of America making the Loonie sensitive to US consumptions data and economical health. Canada, being a highly commodity dependent economy, Canada’s Canadian dollar  is positively correlated to oil which means if the oil price goes up USD/CAD does down and vice versa.

Australian Dollar (AUD)

Nickname: Aussie

Australia exports in a huge scale to china and its economy and currency reflect any change in the situation in china’s economy. Australia being depended on commodity (mineral and farm) exports has seen the Australian dollar rising during the global expansion period and fall when mineral prices fell.

Forex Currency Pairs Video Tutorial

Open demo account to trade currency pairs.

Filed Under: Articles Tagged With: forex education

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

  • Email
  • Facebook
  • LinkedIn
  • Pinterest
  • RSS
  • Twitter
  • YouTube

Forex Strategies

Forex Indicators

Forexobroker

Archives

  • June 2020 (8)
  • May 2020 (13)
  • April 2020 (12)
  • March 2020 (8)
  • February 2020 (11)
  • January 2020 (7)
  • November 2019 (1)
  • October 2019 (1)
  • September 2019 (3)
  • August 2019 (3)
  • June 2019 (1)
  • May 2019 (1)
  • December 2018 (1)
  • November 2018 (4)
  • October 2018 (9)
  • September 2018 (14)
  • August 2018 (14)
  • July 2018 (11)
  • June 2018 (6)
  • May 2018 (13)
  • April 2018 (6)
  • March 2018 (16)
  • February 2018 (18)
  • January 2018 (20)
  • December 2017 (13)
  • November 2017 (19)
  • October 2017 (3)
  • September 2017 (3)
  • August 2017 (13)
  • July 2017 (25)
  • June 2017 (22)
  • May 2017 (20)
  • April 2017 (21)
  • March 2017 (15)
  • February 2017 (16)
  • January 2017 (21)
  • December 2016 (11)
  • November 2016 (21)
  • October 2016 (63)
  • September 2016 (24)
  • August 2016 (22)
  • July 2016 (16)
  • June 2016 (18)
  • May 2016 (16)
  • April 2016 (23)
  • March 2016 (29)
  • February 2016 (23)
  • January 2016 (22)
  • December 2015 (29)
  • November 2015 (28)
  • October 2015 (30)
  • September 2015 (41)
  • August 2015 (52)
  • July 2015 (47)
  • June 2015 (55)
  • May 2015 (53)
  • April 2015 (62)
  • March 2015 (22)

Who's Online

32 visitors online now
9 guests, 23 bots, 0 members

  • Home
  • About
  • Contact

Categories

  • Strategies
  • Articles
  • Dom’s Forex Course
  • Metatrader 4 Indicators
    • Free Metatrader Indicators
    • Paid Metatrader Indicators
  • Metatrader 4 Systems
    • Free Metatrader Systems
    • Paid Metatrader Systems
  • EA’s
    • Paid Expert Advisors
  • Forex Brokers

Visit Our Forex Strategies And Forex Indicators Below:

Forex Trading Strategies

Free Forex Indicators

Paid Forex Indicators

Paid Forex Strategies

“Our order process is conducted by our online reseller Paddle.com. Paddle.com is the Merchant of Record for all our orders. Paddle provides all customer service inquiries and handles returns.”

© 2015-2021 Forexobroker