The foreign exchange risk market, the Forex market, is the world’s biggest financial market. The Forex market is decentralized, meaning it doesn’t have a central exchange or a body in charge. Instead, it comprises a network of banks, other financial institutions, and individual traders who buy and sell currencies.
The Forex market is based on currency pairs, which show the value of one currency against another. In the EUR/USD pair, for example, the first currency (EUR) is called the “base currency,” and the second currency (USD) is called the “quote currency.” On the Forex market, the goal is to make money by buying a currency at a lower exchange rate and selling it at a higher exchange rate.
Traders need to know a lot about the currency pairs they are trading because each pair has its characteristics and can be affected by different economic factors. This blog will discuss the top 5 most-traded currency pairs on the Forex market and what makes them different.
The top five pairs of currencies
There are many currency pairs on the Forex market, but some are more popular and trade more often than others. On the Forex market, these are thinking to be the top 5 currency pairs:
EUR/USD
EUR/USD is the most traded pair of currencies globally, making up 28% of all Forex trades. The US dollar and the Euro are the two most influential currencies globally, and their economies are very connected. Because of this, the EUR/USD pair is known for being very liquid and moving around a lot.
GBP/USD:
The GBP/USD pair, also called the “Cable,” is the second most traded currency pair and makes up 14% of all Forex trading. The British pound and the US dollar are considering haven currencies, and their economies are closely link. The GBP/USD pair is know for being very volatile, and political and economic events in the UK and the US often cause it to change.
USD/JPY:
The USD/JPY pair makes up 13% of all Forex trading and is the third most traded currency pair. The US dollar and the Japanese yen are considering safe-haven currencies, and their economies are closely link through trade and investment. The USD/JPY pair is know for being stable, and traders often use it to protect themselves against other currency pairs.
USD/CHF:
This pair of currencies is the fourth most traded, making up 8% of all Forex trading. The US dollar and the Swiss franc are both considering haven currencies, and the Swiss economy is closely tie to the economy of the Eurozone. The USD/CHF pair is know for being stable, and traders often use it to protect themselves against other currency pairs.
AUD/USD:
This pair of currencies is the fifth most traded, making up 6% of all Forex trades. The Australian and US dollar are base on commodities, and their economies are closely link through trade. The AUD/USD pair is known for being very volatile, and changes in commodity prices and interest rates often cause it to move.
These currency pairs are the most popular among traders and financial institutions. They are trading a lot and have a lot of buyers and sellers on the market.
How the top five currency pairs are alike and different
Each of the top five currency pairs has unique qualities that traders should be aware of when making trading decisions.
EUR/USD:
This pair is know for its high liquidity and volatility, making it suitable for short-term and long-term traders. It is also affect by economic news and data from both the Eurozone and the United States.
GBP/USD:
This pair is also know for its high volatility, often affect by political and economic events in the UK and the US. It’s suitable for short-term traders who can make money from the quick price changes that these events cause.
This pair is knowing for having low volatility, so traders often use it as a hedge against other pairs. It is also affect by economic news and data coming out of the US and Japan.
USD/CHF:
This pair is knowing for being stable, so traders often use it as a hedge against other pairs. Economic news and data from the US and Switzerland also influence it.
AUD/USD:
This pair is knowing for being very volatile, and changes in commodity prices and interest rates often affect it. It’s suitable for short-term traders who can make money from the quick price changes that these events cause.
In general, many economic and political factors affect the top 5 currency pairs, and traders should be aware of these factors when making trading decisions. When choosing which currency pairs to trade, traders should also consider how much risk they are willing to take and how they like to trade.
