Major currencies in forex are known as the most traded pairs with the highest trading volume in the world. These currency pairs represent the economies of some of the most important countries. Let's examine this concept by going to Econville and hearing it from Dr. Mishov. In the bustling town of Econville, there lived a smart economist who was known as Dr. Mishov. He was well-known for his ability to simplify difficult financial concepts in a way that was as straightforward to understand as a bright day. As the afternoon progressed, the citizens of the town gathered in Econville Square, eager to acquire knowledge regarding the enigmatic world of foreign exchange trading. The story was started by Dr. Mishov, who was standing in the middle of the place and adjusting his glasses.
Imagine for a moment that every currency pair that is traded on the foreign exchange market is a character with its own unique history, personality, and experience. What I'm going to do today is introduce you to some of the most well-known ones.
EUR/USD : The Global Giants
Initially, we have the pair of the Euro and the United States Dollar, which is a powerful relationship between the two currencies. These two characters represent both the United States of America and the Eurozone as the largest economies in the world. Consider that they are two giants that are continually influencing one another. There is a strong connection between the Euro and the Dollar, and both currencies react to the news that comes from the Federal Reserve and the European Central Bank. If the United States becomes more powerful or if the Eurozone encounters difficulties, you will observe how this pair responds. Traders consistently place them at the forefront of their attention because they are the most popular pair. This currency pair is the most traded currency pair in the world. Due to its tremendous liquidity, the market typically has the tightest spreads, resulting in the lowest transaction costs.
USD/JPY: The Safe Haven Duo
After that, Dr. Mishov smiled and pointed to a map of Japan that was tacked to the board. He then stated, The USD/JPY pair is like a wise old friend to traders. Another currency that is considered a safe haven is the Japanese yen. The yen is the currency that traders rush to in times of global unpredictability, such as when there are storms in the market or when there is political instability. The movements of this pair are calm and consistent, and they frequently move in an identical manner to the policies of the Bank of Japan. USD/JPY is the currency that people gravitate to when they are feeling worried, just as they would seek shelter in the event of a storm.
GBP/USD: The Powerful Forces, By the name of "Cable"
Adjustments were made to Dr. Mishov's glasses. Oh, and then there's the British Pound to the United States Dollar, sometimes known as the GBP/USD. Cable is a well-known name for this particular pair. One could say that they are the daring explorers of the market; they are full of energy and are constantly on the go. This currency is recognized for its bold personality, as it frequently reacts to the most recent news from the United Kingdom, particularly anything that is associated with Brexit or the policies of the Bank of England. When a significant event takes place in the United Kingdom, the value of the pound sterling to the dollar has a tendency to fluctuate wildly, which is a reflection of the feelings that the British economy is experiencing. While it is exciting, it also has a degree of unpredictability.
USD/CHF: The Reliable Swiss Friend
He went on to say, Introducing the United States Dollar and the Swiss Franc, sometimes known as USD/CHF. When the situation appears to be perilous, traders put their faith in this combination. Similarly to the yen, the Swiss franc is frequently regarded as a safe haven due to the fact that Switzerland's economy is relatively stable. This couple is composed, steady, and does not act in an overly dramatic manner. People put their faith in it during difficult times, which makes it a reliable option when things are unstable in other areas.
AUD/USD: The Commodities Adventurers
Then there is the Australian dollar to United States dollar pair, Dr. Mishov remarked, referring to an image of Australia. These two individuals are risk takers who are connected to the fluctuations that occur in the global commodity markets. A significant amount of iron ore and coal are exported from Australia, and the country's economy is dependent on these resources. When there is an increase in the demand for commodities, the Australian Dollar, also known as the Aussie, becomes stronger. However, if there is a decline in international trade, the Australian dollar may also see a decline. This particular pair has a unique connection with countries such as China, which is Australia's most important trading partner.
USD/CAD: The Oil-Dependent Loonies
Dr. Mishov chuckled as he discussed the next currency pair, the USD/CAD. These are the United States Dollar and the Canadian Dollar, which is commonly referred to as the "Loonie" due to the bird that is featured on the dollar coin in Canada. Due to the fact that oil has a significant impact on the economy of Canada, the price of oil has a significant impact on this pair. Due to the fact that oil is one of Canada's most important exports, the Canadian dollar tends to rise as oil prices go up. The Canadian dollar, on the other hand, loses strength as the price of oil falls. They might be compared to two couples who are dancing to the rhythm of the rising oil prices.
NZD/USD: The Agricultural Kiwi
Dr. Mishov looked at everyone in the crowd. Last but not least, there is the New Zealand dollar to United States dollar pair. Consider the New Zealand Dollar, sometimes known as the Kiwi, to be analogous to a diligent farmer who is reliant on the land. Agriculture, particularly dairy production, is a significant contributor to New Zealand's economy. When there is an increase in the demand for dairy products around the world, the New Zealand dollar gains. Due to the fact that China is a significant trading partner, this pair is very susceptible to changes in the markets operating in Asia, particularly in China.
The Closing Thoughts
During the final moments of his presentation, Dr. Mishov reminded the audience that each of these pairs has its own unique personality, which is influenced by the economics and natural resources of the countries that they represent. There are some that are bold and volatile, such as the EUR/USD and the GBP/USD, while others, such as the USD/JPY and the USD/CHF, give steadiness. Getting to know people's personalities and gaining an understanding of how they react to the world around them is the key to successfully trading forex, my friends. When you have this information, you will be more equipped to negotiate the world of FOREX.
As a result of Dr. Mishov's narration, the citizens of Econville left the plaza that day with a more profound understanding of the amazing stories that lie behind each single currency pair.
