Forex is the world’s largest trading market, open 24 hours a day, five days a week. It’s also the most volatile market, which means there’s a better chance of making a lot of money. The US dollar and/or other worldwide currencies make up forex currency pairs.
The base currency is the first currency in a pair, such as the British pound in GBP/USD. The quote currency is the second currency, which in this case is the US dollar. The base currency is often the trader’s home currency.
A forex currency pair’s price is the amount of the quote currency required to purchase one unit of the base currency.
EUR/GBP 1.45, for example, means that £1.45 is required to purchase one Euro. A EUR/USD exchange rate of 1.89 means that $1.89 will buy one Euro.
Traders can trade with much more leverage and lower margin requirements than they do in equities markets. However, before diving fully into the fast-paced world of forex, you’ll need to understand the most commonly traded currency pairings.
Here are six of the best forex pairs in the market.
The EUR/USD currency pair has a negative correlation with the USD/CHF currency pair and a positive correlation with the GBP/USD currency pair. This is owing to the euro’s, British pound’s, and Swiss franc’s positive correlation.
USD/JPY: Political tensions between the United States and the Far East have been a source of concern for this pair. Because the US dollar is the base currency in all three pairings, the pair tends to be favorably connected with USD/CHF and USD/CAD.
The GBP/USD pair has a negative relationship with the USD/CHF but a positive relationship with the EUR/USD. This is owing to the strong relationship that exists between the euro, British pound, and the Swiss franc.
Due to the fact that the US dollar is the quote currency in these circumstances, the AUD/USD currency combination has a negative correlation with the USD/CAD, USD/CHF, and USD/JPY currency pairs. Because the Canadian and Australian dollars are both commodities block currencies, they have a positive association with each other.
Because the US dollar is the quote currency in these other pairs, the USD/CAD currency pair has a negative correlation with the AUD/USD, GBP/USD, and EUR/USD.
The USD/CNY currency pair denotes the exchange rate between the US dollar and the Chinese renminbi, also known as the yuan. It has accounted for around 4% of daily currency deals in recent years.
In recent years, the US-China trade relationship has been unpredictable, giving USD/CNY traders a wealth of speculative chances.
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