Forex Traiding Pairs

When I thought about some of the first things I learned when I started to trade the Forex market, forex traiding pairs came to mind. To understand those one needs to know about fundamental analysis, which refers to factors that affect the price of each forex traiding pair.

In Forex Trainding it´s important not only to perform technical analysis based on your charts and indicators, but to also be aware of the macroeconomic events that can affect a currency pair. Right from the get go what helped me in my forex education was learning each currency’s characteristics. Regardless of which  pair or pairs you choose to trade, knowing each of their characteristics is extremely valuable because it aids in the accuracy of any trade you perform.

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Europe- Euro. This a quite new currency. It began trading in 1999; however the EURO/USD is the most traded of the forex trainding pairs. Because of this, the EURO/USD is very liquid. The euro is greatly affected by interest rates. If you are trading the EURO/USD pair, you must follow closely the Euribor (Europe’s three-month interest rate), to watch for any changes in investor reactions when trading the EURO/USD pair since the Usd and Euro rates affect each other. The EURO/USD is my personal favorite currency pair because of the many opportunities it gives for potential trades.

Japan- Japanese Yen. Japan is the largest economy in East Asia; consequently the yen is used as an alternate for the whole region’s economy. If any trouble arises in the surrounding countries econokies, the yen may drop in value. The Bank of Japan is known for intervening in the forex market to defend the yen’s value. Another factor affecting the yen is the overall strength of its banking sector.

United Kingdom- British Pound. This is an important currency to watch because the U.K. is one of the largest economies in the world. The main peculiarity about the pound is that it is affected by energy and oil prices. The pound tends to strengthen as they rise.

Switzerland- Swiss Franc. The Swiss Franc is known as an investor’s safe port in times of crisis and uncertainty. Because Switzerland’s banks control much of the world’s wealth, any reports of bank mergers and/or poor earnings directly affect the value of the franc.

Canadian, Australian, and New Zealand dollars. “The Commodity currencies” as they are called refer to. Since commodities consist of the majority of Canada’s exports, the currency will strength or weaken depending on these prices. Usually the Usd and Cad will normally trend in the same direction because most of Canada’s exports are shipped to the U.S.

Australia- Australian Dollar. The Australian dollar is most connected to gold prices. The interest rate differential is monitored because it can guide the long-term trend.

New Zealand- New Zealand Dollar. The New Zealand dollar is linked to commodity prices. It is also closely related to the Australian dollar, meaning they can act as alternatives for each other.