Understanding the Currency Pairs in Foreign Exchange Trading

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You know that the forex market is all about trading currencies. What you might not realize is that the most fundamental thing about the market is understanding the different types of currencies being traded. All currencies are traded in pairs. Knowing these pairs is a good start to getting trading.

The Euro/Us Dollar (EUR/USD). Since the European Union is new, this is also a new currency. It has only been on the market since 1999. But the Euro is still one of the most valuable currencies in the world. The EURO/USD pair is extremely liquid. But it is largely affected by interest rates, so pay attention to the Euribor. The EUR/USD pair is a great way for new traders to get started.

Japan (YEN). Because Japan has such a huge economy, its currency fills in for most of Asia. This can be good because it gains more value, but this can be bad because the economies of these other countries.

United Kingdom (Pound). The United Kingdom has one of the largest economies in the world. But watch out, because the pound is most strongly affected by oil and energy prices. When those are doing well, the pound will do well. When they do poorly, the pound will do poorly.

Switzerland (Franc). The franc is one of the safest currencies on the market. Think of Swiss Bank Accounts – Switzerland controls much of the world’s investments, wealth, and cash. That means that the franc is most closely related to banks. When banks prosper, the franc does well. When the banking industry does poorly, then the franc will do poorly.

The lesser currencies, also known as commodity currencies, are the monies of Canada, Australia, and New Zealand.

Now that you know a little bit about the major currencies on the market, it is time to start trading. Just pick your currency and get to work.


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