Best Forex currency pairs to trade

• The Forex market is the most popular trading market with online traders.
• The Forex market is open 24 hours, five days a week.
• Hundreds of currency pairs are available to trade, each with different characteristics.
• Whether you’re a day trader, swing trader, or trend trader, you will find an abundance of trading opportunities in Forex markets.
• Forex pairs are often divided into three categories: major, minor, and exotic pairs.
• Major economic releases, such as changes in interest rates, employment data releases, inflation metrics, and geopolitical events, can influence the Forex market.

A Forex pair represents the value of one currency compared to another. Each pair consists of two parts: the base currency, which appears first, and the quote currency, which appears second. The base shows the currency being bought or sold, while the quote reflects its value relative to the base.

For example, when trading the euro against the US dollar (EUR/USD), selling the pair means you expect the euro to weaken relative to the dollar. Buying it suggests the opposite - that the euro may strengthen.

Currency pairs are generally grouped into three categories: major pairs, minor pairs, and exotic pairs. Each group has different characteristics in terms of liquidity, volatility, and trading costs, making it essential to understand how they fit into your overall strategy.

Forex majors

Major Forex pairs are the most actively traded in the market. They involve currencies from the world’s largest economies, including the euro (EUR), British pound (GBP), US dollar (USD), Australian dollar (AUD), New Zealand dollar (NZD), Canadian dollar (CAD), Swiss franc (CHF), and Japanese yen (JPY).

These pairs attract significant trading volume, which results in high liquidity and generally lower spreads compared to other categories. Their accessibility generally makes them a common choice for both experienced and beginner Forex traders; however, they still carry a degree of risk.

Forex minors

Minor Forex pairs, also called cross-currency pairs, include combinations of major currencies without the US dollar. They often involve the euro, British pound, or Japanese yen paired with currencies from smaller or emerging economies. Examples include GBP/SGD (British pound vs Singapore dollar) or INR/JPY (Indian rupee vs Japanese yen).

These pairs generally see lower trading volume compared to majors. As a result, they are less liquid and often come with wider spreads, which could increase trading costs and risks.

Forex exotics

Exotic Forex pairs link a major currency, such as the US dollar or euro, with the currency of a developing or smaller economy. Examples include USD/BRL (US dollar vs Brazilian real) or EUR/TRY (euro vs Turkish lira).

These pairs are traded less frequently than majors or minors, making them less liquid. They often experience higher volatility and wider spreads, which could increase trading costs and risks.

When choosing which Forex pairs to trade, it might help to focus on those that align with your strategy and risk tolerance. Traders often start with the most actively traded pairs, as they tend to offer higher liquidity and tighter spreads.

Based on market activity, the most popular Forex pairs include the following:

EUR/USD

The EUR/USD, often referred to as the “Fiber,” is the most actively traded currency pair in the Forex market. It represents the Eurozone and the United States, two of the world’s largest economies.

Because of its high trading volume, EUR/USD is the most liquid pair, generally resulting in tighter spreads. Narrow spreads make it efficient to trade and allow large transactions to be executed with minimal impact on market pricing.

Several key factors influence the EUR/USD exchange rate. These include interest rate decisions by the European Central Bank (ECB) and the US Federal Reserve (Fed), as well as economic indicators such as inflation, employment data, and geopolitical developments.

USD/JPY

The USD/JPY, often called the “Gopher,” is the second most traded currency pair in the Forex market. It combines the US dollar, the world’s most widely traded currency, with the Japanese yen, Asia’s most active currency.

This pair is known for its high liquidity, making it a popular choice among traders. Movements in USD/JPY are strongly influenced by monetary policy decisions from the US Federal Reserve and the Bank of Japan (BoJ). Interest rate changes and broader economic and geopolitical developments in both regions often shape its value.

GBP/USD

The GBP/USD, commonly known as “Cable,” reflects the relationship between the British pound and the US dollar. Its movements often highlight the relative strength of the UK and US economies. When the UK economy grows faster than that of the US, the pound typically strengthens against the dollar, and the reverse is also true.

The pair is also shaped by interest rate policies set by the Bank of England (BoE) and the US Federal Reserve (Fed). Economic indicators such as inflation, employment data, and political developments in both countries could further influence its price.

AUD/USD

The AUD/USD, often referred to as the “Aussie,” measures the value of the Australian dollar against the US dollar. The Australian dollar is closely tied to the country’s export-driven economy, with commodities such as iron ore, coal, and gold playing a major role in its performance.

Movements in global commodity prices often influence the AUD, making this pair sensitive to shifts in demand for raw materials. In addition, monetary policy decisions from the Reserve Bank of Australia (RBA) and the US Federal Reserve (Fed) are key drivers of its exchange rate.

NZD/USD

The NZD/USD, known as the “Kiwi,” reflects the performance of the New Zealand dollar against the US dollar. New Zealand’s agricultural exports, particularly dairy products, strongly influence its value. Like the AUD/USD, this pair is sensitive to changes in commodity prices and is most actively traded during the Asian session.

While seven pairs are generally recognised as majors, some analysts classify only four - EUR/USD, USD/JPY, GBP/USD, and USD/CHF - as the “core majors” due to their trading dominance. The remaining three - AUD/USD, USD/CAD, and NZD/USD - are often grouped as “commodity pairs” because their economies are heavily linked to natural resources.

Both perspectives are widely used, but for practical purposes, all seven pairs are central to understanding the Forex market.

USD/CAD

The USD/CAD, often called the “Loonie,” represents the exchange rate between the US dollar and the Canadian dollar. Like the Australian and New Zealand dollars, the Canadian dollar is considered a commodity currency due to the country’s reliance on natural resources.

Global oil prices, along with exports such as wheat and timber, significantly influence the CAD’s value. Since oil is priced in US dollars, Canada earns substantial USD from its oil exports, which in turn affects the USD/CAD exchange rate. Traders often monitor Brent and WTI crude prices when evaluating this pair.

USD/CHF

The USD/CHF, commonly called the “Swissie,” represents the US dollar against the Swiss franc. This pair is closely watched because Switzerland’s banking system has historically been viewed as a safe haven.

During periods of market uncertainty or high volatility, investors often turn to the Swiss franc, which could cause the USD/CHF exchange rate to decline as the franc strengthens. However, the appeal of the Swiss franc has been affected in recent years by interventions from the Swiss National Bank and challenges faced by some major Swiss banks.

EUR/GBP

The EUR/GBP, often called the “Chunnel,” represents the euro against the British pound. This pair is considered challenging to predict due to the closely linked economies of the UK and the Eurozone.

Traders often monitor announcements from the European Central Bank (ECB) and the Bank of England (BoE), as monetary policy decisions could influence the exchange rate. The pair saw heavy activity around the UK’s EU referendum, but today it is mainly favoured by range traders due to its relatively stable price movements.

Scalping is a short-term trading style focused on profiting from small price movements. Trades are usually held for seconds or minutes, making it essential to choose currency pairs with high liquidity and tight spreads.

Major Forex pairs are generally preferred for scalping because they are the most actively traded and offer the lowest spreads. Narrow spreads make it more practical to enter and exit trades at the desired price, which is critical when targeting small gains.

Pairs commonly chosen for scalping include EUR/USD, GBP/USD, and USD/JPY, as their high trading volumes provide consistent liquidity and minimal slippage.

Day trading, or intraday trading, involves opening and closing positions within a single trading day, often lasting minutes to a few hours. Traders target short-term price movements, using time frames from 15 minutes to one hour, and focus on highly liquid and volatile markets to look for potential trading opportunities.

Major pairs are typically preferred for day trading due to their liquidity, tight spreads, and frequent price movements. Key pairs include EUR/USD, USD/JPY, GBP/USD, AUD/USD, and USD/CAD. EUR/USD offers deep liquidity and responsive price action, USD/JPY benefits from divergent monetary policies, and GBP/USD reflects high volatility from economic and political events.

Commodity-linked pairs like AUD/USD and USD/CAD provide additional opportunities through global commodity price shifts. Experienced traders may also use GBP/JPY and EUR/GBP, though these require stricter risk management due to higher volatility.

Swing trading focuses on capturing price movements over several days to weeks. The most suitable Forex pairs for this style combine sufficient liquidity with volatility that produces noticeable price swings. Markets that have entered a range, with clear support and resistance levels, often provide opportunities for swing traders.

Major pairs like EUR/USD are popular due to their high liquidity, making them ideal for beginners. Commodity-linked pairs such as NZD/USD and AUD/USD offer additional opportunities, with price movements influenced by agricultural and mineral exports. USD/CAD often tracks oil prices, while EUR/JPY responds to economic developments in Europe and Japan.

Swing trading involves monitoring multiple pairs to identify the clearest opportunities. Technical analysis of support and resistance levels helps traders plan entries and exits, while keeping options open allows them to adapt to evolving market conditions.

For traders in the Northern Hemisphere seeking higher volatility, Asian cross-currency pairs that exclude the US dollar, such as AUD/NZD, AUD/JPY, and NZD/JPY, could offer possible overnight trading opportunities. These pairs are most active during the UK night session, when trading volumes and liquidity peak. Their price movements often respond to economic releases and events from the Asian session.

Given the region's trade links, the AUD/NZD pair is particularly sensitive to developments in Australia, New Zealand, and China. The Japanese yen, long regarded as a safe-haven currency, has historically been used in carry trades - borrowing in yen to invest in higher-yielding assets - though this strategy has been affected by globally low interest rates since the 2008 financial crisis.

Understanding Forex trading sessions could help traders refine their strategies. The Forex market operates 24 hours a day, five days a week, with activity driven by a global network of brokers, banks, and exchanges. Forex trading hours are determined by the opening and closing times of each country’s market.

The four main sessions are:

• London: 08:00–17:00 GMT
• New York: 13:00–22:00 GMT
• Sydney: 22:00–07:00 GMT
• Tokyo: 00:00–09:00 GMT

While the 24-hour market could offer continuous trading opportunities, understanding the most volatile sessions helps traders select the best times to execute their strategies. Volatility patterns vary by pair and session, influencing potential trade setups and risk management.

Fundamental analysis in Forex focuses on factors that affect currency values over time. Key drivers include central bank interest rate decisions, major economic data releases, and geopolitical developments. These elements influence market sentiment and could lead to significant movements in currency pairs, making them essential considerations for both short-term and long-term trading strategies.

Interest rates

Central banks aim to maintain economic stability, primarily through adjustments to interest rates. By raising or lowering rates, they influence borrowing costs, spending, and investment within their economies. Forex traders closely monitor these decisions, as they could affect currency values.

Demand for that currency often rises when a central bank increases interest rates. Higher yields attract investors seeking better returns, which could drive the currency’s value higher against others. Conversely, rate cuts may reduce demand and weaken a currency.

For example, if the European Central Bank (ECB) raises interest rates, the euro is likely to strengthen against the US dollar. Understanding these dynamics could help traders anticipate market movements and incorporate interest rate trends into their strategies.

Economic data

Economic data releases offer insight into a country’s economic health and could significantly influence currency values. Key indicators include consumer price index (CPI) for inflation, nonfarm payrolls for employment, gross domestic product (GDP), retail sales, and purchasing managers’ indices (PMI). Each of these measures provides traders with information on economic growth, spending, and overall market conditions.

Traders often monitor these indicators closely, as strong or weak data could trigger short-term volatility in currency pairs. For example, higher-than-expected inflation may strengthen a currency if it increases the likelihood of interest rate hikes.

Using an economic calendar helps traders track upcoming releases and plan trades around potentially market-moving events. By anticipating economic announcements, traders could better manage risk and identify opportunities in the Forex market.

Politics

Geopolitical events can significantly impact currency markets. Wars, trade disputes, political instability, civil unrest, elections, and policy changes often create volatility in Forex markets as traders react to uncertainty and potential economic consequences.

Government decisions, particularly regarding fiscal policy, could influence economic growth and inflation, which in turn affect currency values. For example, changes in taxation, public spending, or trade agreements can strengthen or weaken a nation’s currency depending on market perception.

Traders monitor geopolitical developments closely to anticipate market reactions and adjust their strategies. Understanding these factors alongside economic data and central bank policies provides a more complete picture of the forces driving Forex markets.

Volatility

Volatility in the Forex market reflects how quickly and sharply currency prices can change. It's influenced by shifts in investor sentiment, which could occur unexpectedly due to economic, political, or financial developments.

Rapid changes in interest rates, major economic announcements, or political instability could all trigger sudden swings in currency values. Traders might need to be aware that volatility could create both opportunities and risks, depending on market conditions and trading strategies.

Staying updated with real-time news and market analysis might be essential. Monitoring global developments allows traders to anticipate potential price movements and adjust positions accordingly to manage risk effectively.