5 Most-Popular Forex Majors
Updated January 9, 2024.
Major currency pairs are those that are actively traded in the global forex market. Today, the list varies, but it is safe to say that the major currency pairs are currently comprised of USD/CAD, EUR/USD, USD/JPY, GBP/USD, AUD/USD, NZD/USD, and USD/CHF. Investors highly liquid and stable.
The EUR/USD currency pair is perhaps one of the most interesting pairs. Last year, the euro cratered to more than a 20-year low and reached parity with the greenback (the dollar). Nearly everyone was bearish on the euro amid an energy crisis and a plunging economy. Today, however, market analysts turned bullish on the currency for several reasons: a warmer-than-expected winter, better-than-expected economic data, and the European Central Bank (ECB) possibly ending its quantitative tightening program in the spring on a decent eurozone economy.
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Investors have soured on the British pound, primarily due to out-of-control inflation, a Bank of England (BoE) that is terrified of the gilt (bond) market, and a slowing economy. This currency pair trades in either direction based on fiscal and monetary policy, akin to what happened this past fall when the pound cratered and the yields spiked at an alarming size and pace. But some industry observers say that investors should not be surprised if they notice a sideways trend.
On the technical side of things, the pound sterling is the third most-traded currency, behind the U.S. dollar and the euro. This is a double-edged sword: volumes are high, but the price can fluctuate because of its global influence.
When it comes to the USD/CAD currency pair, traders will monitor what is happening on the south side of the U.S.-Canada border than what might be happening in the Great White North. Despite energy commodities soaring in 2022 and Canada maintaining a current account deficit, the loonie failed to catapult to the moon last year. It was all about the greenback. Now, the buck has slumped considerably since November on expectations that the Federal Reserve will begin to slow down the pace and size of rate hikes, but the U.S. dollar could resuscitate a modest rally on risk aversion amid volatility in the financial markets and any re-acceleration of inflation.
Right now, the spread is immense, as the pair trades above 1.30.
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For years, the Swiss franc has been considered a safe-haven asset when times are tough, be it a global market meltdown or a recession. While it is still a highly liquid pair, conditions could be fascinating based on the Swiss National Bank's (SNB) plans for the upcoming year. Remember, before the great inflation crisis of the last couple of years, the franc attempted to limit its appreciation to make its exports more attractive. Monetary policymakers reversed this policy during last year's bear market. It is unclear what the institution's intentions will be in the upcoming year, but broader market trends will be the key driver.
The USD/CHF is highly liquid, so there may not be sudden spikes as you would find with, for example, the USD/TRY.
» Confused about currency pairs? Learn the basics of cross-currency pairs in forex trading
Is what the Bank of Japan (BoJ) does interesting? If you are trading forex or participating in the broader financial markets, it will need to be because policymakers could impact the USD/JPY pair considerably this year. The central bank has employed a series of measures as of late to support the economy that could further dampen the yen: keep ultra-low interest rates intact, push ahead with a Yield Curve Control mechanism, and purchase more bonds since demand has dried up. It might not be economic data driving the yen in the first half of 2023, but whatever policy instrument instituted by Governor Haruhiko Kuroda and his coming successor.
On the technical side, the USD/JPY pair is also a terrific FX trade since it maintains enormous trading volumes.
What Is the Best Major Currency Pair to Trade in Forex?
If you are just starting out in forex trading, it is always best to trade just one major currency pair. This allows you to get comfortable in the forex market, spot patterns, and determine if your strategy works. From ING to Morgan Stanley, a plethora of market analysts have abandoned their previous bearish position and initiated "a factory reset." The consensus among strategists is that the currency pair will finish 2023 at around 1.15, which would be a turnaround from the abysmal performance in 2022.
In the end, no matter what major currency pair you trade in forex, be sure to do your research, ensure your account is liquid, trade what you can afford to lose, and pay attention to a whole host of factors.
» Interested in more than the major currency pairs? Discover the difference between major and minor pairs
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