Forex Trading: Expertise Currency Pairs

In our previous article, we probed into the essentials of forex trading, focusing on how major currency pairs such as EUR/USD and USD/JPY influence the market. Today, we’ll look remaining currency pairs like minor currency pairs, Exotic currency pairs . we’ll examining their significance and influence on global trading patterns.

At the moment, you are curious to know the other currency pairs for your trading practices. So, Let’s begin with a detailed discussion with Assh.

What is Liquidity in Forex? 

Liquidity refers to the level of activity in a financial market. 

In forex, it’s based on the number of active traders and the volume of trades in a specific currency pair.

More frequently traded pairs, like EUR/USD, have higher liquidity compared to less traded pairs like AUD/USD.

Major Cross-Currency Pairs/Minor Currency Pairs

Cross-currency pairs, or simply “crosses,” include any two major currencies except the U.S. dollar. 

Major crosses are also known as minors and, while not as frequently trading as the majors, they still offer ample trading opportunities in forex. The most actively traded crosses involve the euro (EUR), Japanese yen (JPY), and British pound (GBP).

There some Minor Currency Pairs with major three non-USD currencies

Euro Crosses Currency Pairs

The EUR/CHF can be impacted by geopolitical stability in Europe.

The EUR/NZD is often driven by agricultural export performance from New Zealand.

The EUR/GBP pair often reflects economic sentiment between the Eurozone and the UK.

The EUR/AUD tends to be affected by economic data from both the Eurozone and Australia.

Keep in Mind 

Yen Crosses Currency Pairs

What did you think about Yen Cross?

Pound Crosses Currency Pairs

Did you know that, there are several other currency cross pairs that also trading in forex?

So, Let’s start to find the answer with Assh.

Other Crosses Currency Pairs

Exotic Currency Pairs

Exotic currency pairs consist of one major currency and one from an emerging market. 

These pairs consist of one major currency and one currency from an emerging or smaller economy, such as the USD/TRY (U.S. Dollar/Turkish Lira) or EUR/SEK (Euro/Swedish Krona). 

In short, these pairs are less liquid and more sensitive to economic and geopolitical events, leading to higher transaction costs and more volatility. There are some examples include:

This makes them both challenging and potentially rewarding for traders who are willing to explore the diverse economic landscapes and geopolitical factors that influence these currencies. 

Aside from the three main categories of currency pairs, there are additional “groups” of currencies that are commonly referenced in the FX world and should be on your radar.

The interesting points about Exotic Currency Pairs:

Higher Volatility: Exotic pairs often experience larger price swings, offering potential for higher profits.

Lower Liquidity: These pairs are less traded, which can lead to wider spreads and more trading costs.

Economic Diversity: Exotic pairs provide exposure to emerging markets and their unique economic factors.

Geopolitical Sensitivity: Political events and stability significantly impact the value of exotic currencies.

Commodity Influence: Many exotic currencies are tied to commodity prices, adding another layer of market analysis.

Cultural Insight: Trading exotic pairs can offer a deeper understanding of global cultures and economies.

Risk and Reward: The higher risk associated with exotic pairs can lead to substantial rewards for informed traders.

Other Currency Groups

G10 Currencies

The G10 currencies are the most heavily trading currency at global level and include:

The Scandies

Scandinavian currencies, known as the “Scandies,” include:

DKK (Denmark) – krone

SEK (Sweden) – krona

NOK (Norway) – krone

The “Scandies” refer to the Scandinavian currencies, including the Swedish Krona (SEK), Norwegian Krone (NOK), and Danish Krone (DKK). So, Let’s take some quick facts about it:

Firstly, these currencies represent some of the most stable and prosperous economies in Europe.

Secondly, the NOK is heavily influenced by oil prices, given Norway’s significant oil exports.

Thirdly, the Swedish and Danish central banks are known for their proactive monetary policies.

CEE Currencies

You know about the CEE?

So, let’s take a brief overview of CEE (Central and Eastern European) currencies.

The CEE currencies encompass the currencies of countries in Central and Eastern Europe, such as the Polish Zloty (PLN), Hungarian Forint (HUF), and Czech Koruna (CZK). Explore  some key points:

These currencies have benefited from economic reforms and integration with the European Union.

CEE currencies can be more volatile compared to major currencies, influenced by regional political and economic developments. Specifically, high levels of foreign direct investment in CEE countries impact their currency strength and stability.

Commonly trading CEE currency pairs include EUR/PLN, EUR/HUF, and EUR/CZK.

Central and Eastern European currencies include:

BRIICS

BRIICS stands for Brazil, Russia, India, Indonesia, China, and South Africa. These countries are considered significant emerging market economies. some fascinating highlights about BRIICS currencies:

That was a comprehensive overview of currencies, that is significantly enhancing your FX knowledge.

Let’s summarize what you’ve learned

By understanding the different types of currency pairs, the nature of exchange rates, and the specific characteristics of major, minor, and exotic pairs, traders can better navigate the forex market. 

Forex trading offers a dynamic and complex market with numerous opportunities. Whether trading major currency pairs with high liquidity or exotic pairs with higher volatility, knowledge is key to making informed trading decisions.