Traders can trade various types of currencies in forex trading, of which the five most popular pairs are EUR/USD, GBP/USD, AUD/USD, USD/CHF and USD/JPY. However, don't assume that you can apply the same strategy to all currency pairs because each currency pair has different characteristics.
For example, daily price fluctuations in USD/CHF are usually small. If you set a profit target of up to 100 pips, it may not be achieved in a day, and you may need to let your position float for a few days to reach this target. Even then, of course, only if the trend doesn't move in the opposite direction you expected.
However, the daily price fluctuations of EUR/USD or GBP/USD are relatively large, so it is easy to catch the profit target of 100 points within a day, as long as the direction of the price trend conforms to your analysis results.
Good analytical skills alone do not guarantee the success of a trading position, a trader also needs to know the characteristics of a currency pair. By knowing the characteristics of each currency pair, traders can more easily plan trading positions, thereby increasing the likelihood of success. This article, Mr. ATM, will help you understand the characteristics of the most popular currency pairs among foreign exchange traders.
EUR/USD
1
Average daily price fluctuation: 75-150 points
The most active trading time: European session overlaps with US session (15:00-23:00 Beijing time)
Most Influential Data: Non-Farm Payrolls (NFP), Gross Domestic Product (GDP), Interest Rate Changes (Rate Statement), Fed Policy Announcements, European Central Bank (ECB) Policy Announcements, Official Central Bank Speeches, Consumer Price Index (CPI), Producer Price Index (PPI), US Retail Sales, US Core Durable Goods Orders and Purchasing Managers Index (PMI).
EUR/USD is the most traded currency pair on the foreign exchange market, representing the world's two largest economies. As a result, its liquidity is high almost every day, while its volatility is relatively moderate. If there is an important news release from these two regions, its impact may spread to other currency pairs as well. However, if there are statutory holidays for US or European banks, trading will calm down and price volatility will be greatly reduced, which can be seen every year from Christmas to New Years.
GBP/USD
2
Average daily price fluctuation: 100-300 points
The most active trading time: European session overlaps with US session (15:00-23:00 Beijing time)
Most Influential Data: Non-Farm Payrolls (NFP), Gross Domestic Product (GDP), Interest Rate Changes (Rate Statement), Fed Policy Announcements, Bank of England (BoE) Policy Announcements, Official Central Bank Speeches, Consumer Price Index (CPI), Producer Price Index (PPI), US Retail Sales, UK Retail Sales, UK Claimant Number Change, US Core Durable Goods Orders and Purchasing Managers Index (PMI).
The City of London has been the financial center of the world since the Middle Ages. After World War II, New York became a new financial center that coexisted with London. Therefore, the transaction volume between London and New York is very high. Many times, GBP/USD is more volatile than EURUSD. In any case, the UK's role in the global economy has declined over time, so UK economic news rarely affects currency pairs other than GBP/USD and GBP crosses (EUR/GBP, GBP/JPY, etc.) . However, the news effect itself can cause large changes in GBP/USD and other sterling systems in a short period of time.
AUD/USD
3
Average daily price fluctuation: 50-100 points
The most active trading hours: Asian session (Beijing time 07:00-17:00) and American session (Beijing time 21:00-23:00 00)
Most Influential Data: Non-Farm Payrolls (NFP), Gross Domestic Product (GDP), Interest Rate Changes (Rate Statement), Fed Policy Announcements, Reserve Bank of Australia (RBA) Policy Announcements, Official RBA Speeches, Consumer Prices Index (CPI), Producer Price Index (PPI), US Retail Sales, US Core Durable Goods Orders, Australia Unemployment Rate, Australia Trade Balance, China's GDP and China's Trade Balance.
Australia is one of the financial centers in the Asia-Pacific region and has a very close trade relationship with China. Therefore, important economic news from China may affect AUD/USD. AUD/USD is often touted as a Chinese proxy currency in the foreign exchange market, since the Chinese yuan cannot be traded freely (China operates a controlled floating exchange rate system). In addition, fluctuations in commodity prices (such as crude oil, iron ore, coal and gold) may also affect the trend of AUD/USD.
USD/JPY
4
Daily average price fluctuation: 100-150 points
The most active trading hours: Asian session (09:00-17:00 Beijing time) and American session (21:00-23:00 Beijing time)
Most Influential Data: Non-Farm Payrolls (NFP), Gross Domestic Product (GDP), Interest Rate Changes (Rate Statement), Fed Policy Announcements, Bank of Japan (BoJ) Policy Announcements, and Central Bank Official Speeches.
Along with the Swiss franc, the yen is one of the safe-haven currencies investors are interested in during times of turmoil in the global financial system. On the other hand, the Bank of Japan is often not optimistic about the appreciation of the yen, because it is considered to worsen the competitiveness of Japanese products in the international market. Therefore, the Bank of Japan often introduces policies or makes related comments aimed at devaluing its currency, and traders should also pay attention to these factors when conducting foreign exchange transactions.
USD/CHF
5
Average daily price fluctuation: 50-100 points
The most active trading time: European session overlaps with US session (15:00-23:00 Beijing time)
Most Influential Data: Non-Farm Payrolls (NFP), Gross Domestic Product (GDP), Interest Rate Changes (Rate Statement), Federal Reserve Policy Announcements, Swiss National Bank (SNB) Policy Announcements, and Central Bank Official Speeches.
The price movement of the USD/CHF currency pair appears to be very slow compared to other major currency pairs. However, major turmoil can suddenly arise due to statements by central bank officials or unexpected geopolitical events. That's because the Swiss franc has soared amid turmoil in the world's financial system, becoming a safe-haven currency sought by global investors. The security guarantees provided by the Swiss banking industry are well known, therefore, in a crisis situation, funds from abroad can instantly increase the value of the Swiss franc. On the other hand, the SNB doesn't like CHF appreciation either, so they often intervene, which in turn depresses the value of the CHF, which is why volatility in USD/CHF is so limited.
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