When talking about Forex cross currency pairs, the quoted currency is being used to value a currency, not the popular US dollar. The top traded crosses on traders’ list are EUR/CHF, EUR/GBP, and EUR/AUD due to their higher liquidity.
CAD/JPY, NZD/JPY, and GBP/JPY are another favorite cross-currency group. This group enables carry trading, so it is no wonder why it is popular among traders.
One of the most important things to know when trading majors is that the US dollar and the quoted currencies can possibly be of the same value. Thus, it would seem like a guessing game among traders when making decisions because it is beyond certainty if the dollar would spike or fall.
Economic recovery in the U.S. or Euro area might seem good news for traders. But this situation would add more difficulty to choose whether to go long or short. Looking at the other side, a geopolitical threat from North Korea, which sounds like bad news, can actually open opportunities for trading EUR/JPY when this threat pressures the yen.
Moving on, here are the most widely used crosses that you need to take a look at and try:
EUR/CHF
Switzerland is the euro’s top trading partner. With the Swiss franc, you might wonder why it is the most preferred currency in carry trading. The answer lies in its low-interest rates, which, as we all know, are very attractive.
Since 2006, the EUR/CHF pair shows a decent trend dynamics, making it a popular choice among traders.
EUR/GBP
The euro is one of the closest partners of the UK. With this close relation, the trading of EUR/GBP will be the right position if the trading is carried out on the fundamental factors of Great Britain and the pound.
NZD/JPY
This pair has the highest rate differential which makes it attractive for carry traders. If the overall technical and fundamental indicators are beneficial for growth, then the NZD/JPY pair is recommended for long positions.
EUR/JPY
Since it is closely tied with EUR/USD and USD/JPY, it gained the spot as one of the most widely used currency pairs. It catapults traders on the beneficial side because of the difference in the growth patterns and interest rate of Japan and the euro area.
CAD/JPY
Because of Canada and Japan’s heavy involvement in oil activities, the CAD/JPY pair can project oil price movements. Also, with the help of this cross currency pair, its ability to project can be applied on Forex, too.
Oil activities have opposite effects on Canada and Japan. Canada is the world’s top 2 in oil reserves and a net exporter raking high revenues from oil. On the other side, Japan, a major exporter of oil, suffers losses. With these circumstances, it is recommended to open long positions on this pair if the market expects oil prices rally.
As you can see, every currency pair has its unique features depending on the relations and activities that its respective country has. This variety gives traders an elbow room to choose features that can fit their short-term or long-term trading plans.
Also read: Forex Liquidity and Volatility Defined
