The Characteristics of Major Currency Pairs

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Major Currency Pair Characteristics
Major Currency Pair Characteristics

When you are new to trading, you really want to learn as much as possible as quick as possible. As I am learning myself, I am always on the hunt for new knowledge and I found that some basic information regarding the characteristics of the major forex pairs might come in handy for trading with binary options. It is always good to know, who you are playing with – Binary options are not different.  Let’s take a look at them!

Major Forex Pairs

Upfront some basic knowledge for the prices:
1st currency of the pair leads.  This means the price of the pair shows how many of the second currency you need to buy 1 unit of the first.

Example USD/JPY: Price of the Japanese Yen (here QUOTE currency /MONEY) is 100.762 right now. This means you need 100.762 JPY to buy 1 US Dollar (here BASE currency / COMMODITY)

1. EUR/USD

EURO against the US Dollar is without a doubt the most popular pair. The two strongest currency pairs against each other promise to be volatile and to heavily react on most of the major news. The EU/USD is the most traded currency asset worldwide. Generally: If something happens that makes the Dollar stronger, this pair will decrease, as I need less US Dollar to buy an EURO.

Major playtime: London session
Affective news: News regarding FED, ECB, NFP, FOMC strong Eurozone news
Correlates negatively: USD/CHF
Correlates positively: GBP/USD

How to use this knowledge? If EUR/USD correlates USD/CHF negatively it is wise to watch both closely in conclusion. For example if the EUR/USD breaks its support level it could be that USD/CHF will break its resistance level soon, if it has not done this yet.

The break of psychological levels like 1.3000 has an impact with EUR/USD as it tends to (for example) rise further without much retracement, if such a thing happens.

2. USD/JPY

As many pairs with the Japanese Yen it can become quirky. However, it is still popular amongst traders as it reacts pretty good to many occuring news about the Japanese economy and reflects US news pretty much. If the japanese governement starts playing with the currency strength again, it usually pushes this pair lower. The breakouts on USD/JPY are often true ones. This means if its increasing it gets pushed and pushed and pushed more and versa vice. The UJ is like an all-or-nothing-pair: It can be calm and stay in consolidation mode for hours and looking like nothing is ever going to be happen again here, and on the the other hand if it gets into the jive it can dance with much endurance. So if your indicator fires that the UJ is overbought and will retrace, think twice if you blindly trust and trade it (which you should not do in general).

Major playtime: London session, Tokyo session, New York session

3. GBP/USD

The British pound is not only since Brexit an interesting pair to trade. The FOREX pair GBP against USD seems to follow similar logical patterns as EURO vs. USD, so if you succeed in trading with EURO/USD you may try your strategies with GBP/USD as well. The GBP/USD is often referred as “The Cable” and love to spike up down. It is known for being pretty volatile and for big movements, which seems to change a bit since Brexit referendum.

Major playtime: London session
Affective news: News regarding FED, ECB, NFP, FOMC strong Eurozone news
Characteristics to use: Good to trade against the trend, as the spikes often revert to mean after a few corrections. Known for having false breakouts and wild movements. It is wise to observe this pair for a long time before to start trading it.

Major playtime: London and New York session

4. AUD/USD

All pairs containing the Australian Dollars are reflecting to the price of oil and even more from gold, as these commodities are important to Australia. Therefore it become an important pair for traders. Oil sucking countries like USA or China are important indicators how this pair might move, so watch the economical news closeley for this pair. The AUD/USD is often played by major banks, so watch out if mAnips come to the party.

Major playtime: Sidney, London and New York

5. USD/CHF

Switzerland, the last bastion within Europe that is an economic power and not in the EU (ok soon accompanied by the brits). However the USD against CHF seems to be good for newstraders as European economic news, like announcements of the ECB reflect to this pair with a delay, which can be used for short time frame trades. As the Swiss Franc is a safe haven asset, you will have it raising if major news occure that implement insecurity for the future – you will need more USDollar to buy 1 Franc, so the USD/CHF (often referred as “Swissy”) will rise.

Major playtime: London and New York session

6. USD/CAD

The US Dollar against the Candian Dollar reflects also pretty much to everything oil related. Oil plays a major role in the  Canadian economy and their neighbours (the US) are junkies for the “black crack”, whilst Canada is their dealer. There are also heavy relations between the US stock market and the one by the Candians which reflect pretty well on this pair.

Major playtime: London and New York session

 

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