Popular trading currency pairs: Top 10 most traded forex currencies

Background on Choosing the Right Forex Currency Pairs

For those just starting in trading, selecting high-potential currency pairs is a crucial first step. Not all pairs are suitable for everyone. Some pairs are highly volatile and suitable for risk-takers, while others are more stable and better for conservative traders. They can be categorized into main pairs (Major Pairs), minor pairs (Minor Pairs), and exotic pairs (Exotic Pairs).

The key differences lie in liquidity (Liquidity), spread (Spread), and volatility (Volatility). Understanding the characteristics of each pair helps traders make informed decisions and adjust their risk accordingly.

Forex Pair Structure: How It Works

Forex pairs consist of two main components: the base currency (Base Currency) and the quote currency (Quote Currency). For example, EUR/USD, where the euro is the base currency and the US dollar is the quote currency.

When the exchange rate shows EUR/USD = 1.3045, it means 1 euro equals 1.3045 US dollars. These rates fluctuate constantly based on economic factors, monetary policies, and market sentiment.

###Measurement Unit of Change

Traders use Pips (Percentage in Points) to measure price movements. One Pip equals a change at the 4th decimal place (e.g., 1.3045 to 1.3046). As the number of Pips increases, potential profit also increases.

###Main Driving Factors

Interest rates, inflation, employment data, and economic growth of both countries heavily influence prices. For example, if the Eurozone announces strong economic data, the euro’s value against the dollar often strengthens.

Comparison of 10 Popular Forex Pairs: Key Data

Note for understanding the table:

• Pips per day: Indicates typical daily volatility, which may increase during economic data releases.
• Market Share: Percentage of global trading volume. Pairs with higher shares tend to have better liquidity and narrower spreads.

Analysis of the 10 Popular Forex Pairs

1. EUR/USD: The Queen of the Forex Market

When it comes to the most recognized currency pair, EUR/USD is undeniable. It accounts for nearly a quarter of global trading volume, reflecting worldwide economic conditions and strong trade links.

Price Drivers:

• Interest rate decisions by the European Central Bank (ECB) and the Federal Reserve (Fed)
• GDP, employment, and inflation data from both regions
• Geopolitical events

Best Trading Times: Between 08:00 - 16:00 GMT when London and New York markets overlap. Volatility and liquidity are highest then.

Average Volatility: 70-90 Pips per day, potentially higher during major economic announcements.

Suitable for: Beginners who prefer predictable pairs with high liquidity. Professional traders also favor it for short-term and long-term profit opportunities.

2. USD/JPY: The Standard of Asia

USD/JPY represents the two largest economies in the world. Its movements respond to economic data from the US and Japan, as well as central bank policies.

Characteristics:

• Moderate volatility with responses to geopolitical events
• The Japanese Yen is considered a safe-haven currency, often moving inversely to market risk sentiment
• The interest rate differential between the Fed and the Bank of Japan (BoJ) is highly influential

Optimal Trading Times: During the Asian session (23:00 - 03:00 GMT) when Tokyo opens. Also, volatility occurs during the London-New York overlap.

Volatility: 50-70 Pips per day, increasing significantly during economic uncertainty.

Suitable for: Traders who prefer the Asian session and macroeconomic analysis, especially geopolitical developments.

3. GBP/USD: The Cable Full of Opportunities

GBP/USD is nicknamed “The Cable” because old telegraph cables under the sea once transmitted exchange rate data between the UK and the US. Known for high volatility and profit potential.

Characteristics:

• Much more volatile than EUR/USD, as the pound is sensitive to economic data
• Sensitive to political events like Brexit and policy changes
• UK GDP, interest rates, and employment data have major impacts

Best Trading Hours: 08:00 - 16:00 GMT when London and New York are active, including the London morning session (07:00 - 09:00 GMT).

Volatility: 90-110 Pips per day, sometimes higher during major economic news.

Suitable for: Intermediate to advanced traders who enjoy volatility and profit opportunities. News traders and short-term strategists find GBP/USD highly promising.

4. USD/CHF: The Safe-Haven Pair

USD/CHF reflects the Swiss Franc, a safe-haven currency closely linked to Switzerland’s political and financial stability.

Characteristics:

• Stable correlation, lower volatility than GBP/USD
• Often moves inversely to global risk sentiment
• Swiss central bank policies, inflation, and export data influence it

Best Trading Times: 07:00 - 16:00 GMT during London and New York sessions, when Swiss markets are active and aligned with European markets.

Volatility: 50-70 Pips per day, increasing during US or Swiss economic releases.

Suitable for: Risk-averse traders seeking stability. Suitable for hedging and risk management.

5. AUD/USD: The Commodity Proxy

AUD/USD, nicknamed “Aussie,” is closely linked to gold, iron ore, and other commodities, as Australia is a major exporter.

Characteristics:

• High volatility due to commodity market influences
• Trade relations with China and Asia significantly impact it
• The Reserve Bank of Australia (RBA) plays a key role

Best Trading Times: During the Asian session (00:00 - 04:00 GMT) and overlapping with New York.

Volatility: 60-80 Pips per day, increasing with commodity price swings.

Suitable for: Commodity traders, trend followers, and those trading during Asian hours.

6. USD/CAD: Not Just a Nickname

USD/CAD is nicknamed “Loonie” after the loon bird depicted on the Canadian dollar coin. It is heavily influenced by crude oil prices, as Canada is a major oil exporter.

Characteristics:

• Strongly correlated with global oil prices
• US and Canadian economic data are influential
• Bank of Canada (BoC) and Fed policies matter

Best Trading Times: During the New York session (12:00 - 20:00 GMT) when both markets are active.

Volatility: 60-80 Pips per day, fluctuating with oil price changes.

Suitable for: Commodity-focused traders, North American trend followers, and investors interested in energy markets.

7. EUR/GBP: European Competition

EUR/GBP reflects economic relations between the Eurozone and the UK. It is actively traded in European markets.

Characteristics:

• Less volatile than GBP/USD but sensitive to data from both regions
• Influenced by economic and trade relations between Eurozone and UK
• Political events like Brexit and EU negotiations have major impacts

Best Trading Times: 07:00 - 16:00 GMT during the London session, when both currencies are actively traded.

Volatility: 40-60 Pips per day, higher during major news.

Suitable for: Traders interested in European economic trends, seeking lower volatility than GBP/USD but exposure to pound movements.

8. USD/CNY: The Power of the Economy

USD/CNY reflects the economic relationship between the US and China, two major global powers.

Characteristics:

• Strictly controlled by the People’s Bank of China (PBoC)
• Chinese monetary policy, trade balance, and economic data are influential
• Geopolitical tensions between US and China impact it

Best Trading Times: During the Asian session (01:00 - 09:00 GMT) when Chinese markets are active.

Volatility: 50-70 Pips per day, but can change with government interventions.

Suitable for: Emerging market traders, those analyzing Chinese policies, and global economic impact followers.

9. NZD/USD: Opportunities from Far Away

NZD/USD, nicknamed “Kiwi,” represents New Zealand and US economies. It is influenced by dairy prices, as New Zealand is a major exporter.

Characteristics:

• Tightly linked to global dairy prices
• RBNZ (RBNZ) announcements have major effects
• Often correlates with risk sentiment and global economic health

Best Trading Times: Asian session (00:00 - 04:00 GMT) and overlapping with New York (12:00 - 16:00 GMT).

Volatility: 50-70 Pips per day, increasing with commodity price changes.

Suitable for: Commodity traders, trend followers, and those trading during Asian hours.

10. USD/HKD: Unique Characteristics

USD/HKD reflects the relationship between the US dollar and Hong Kong dollar. It is uniquely pegged to the US dollar.

Characteristics:

• Stable due to peg
• Very low volatility compared to other pairs
• Can experience sharp moves if the peg is under threat

Best Trading Times: During the Asian session (01:00 - 08:00 GMT) when Hong Kong markets are open.

Volatility: 10-30 Pips per day, limited due to the peg.

Suitable for: Stability seekers, carry traders, and those focusing on Asian financial markets with low risk appetite.

Choosing the Right Currency Pair for Your Trading Style

For beginners: EUR/USD and USD/JPY offer high liquidity, narrow spreads, and predictable behavior.

For volatility lovers: GBP/USD, AUD/USD, and NZD/USD provide opportunities for profit from price swings.

For commodity analysts: AUD/USD, USD/CAD, and NZD/USD are closely linked to commodity markets.

For stability seekers: USD/CHF and USD/HKD have low volatility.

Summary of Choosing Forex Pairs

The forex market offers opportunities for traders worldwide. However, success depends on selecting the right pairs that match your trading style and capabilities.

Economic factors, trade data, interest rate decisions, and geopolitical events all influence currency movements. Keeping up with news and real-time updates is essential for effective trading. Good risk management is the foundation of long-term success.