The World’s Most Commonly Traded Currencies 

Foreign exchange traders have a distinct benefit over other types of traders in the financial markets since they enjoy the benefit of highly leveraged trades as well as lower margin requirements, when compared to the stock market. However, before you get into the fast-paced world of Forex, it is important to understand the currency pairs for trading that are available, and which are the most commonly traded. 

While there are a few retail traders who deal in the more exotic global currencies, such as the Czech koruna or the Thai baht, most Forex trading in the world revolves among a set of six currency pairs. Of these, the four most popular, known in the market as the “majors” include: 

EUR/USD (euro/dollar) – The "euro" 

USD/JPY (U.S. dollar/Japanese yen) – The "gopher" 

GBP/USD (British pound/dollar) – The "cable 

USD/CHF (U.S. dollar/Swiss franc) – The " 

It is these currency pairs, as well as their various combinations, which account for about 95% of all the speculative trading in the Forex market. 

EUR/USD 

The EUR/USD pair is one that has a negative correlation with the USD/CHF, while having a positive correlation to the GBP/USD pair. This is because of the positive correlation that exists between the British Pound, the euro and the Swiss franc. 

USD/JPY - The "Gopher" 

The second most actively traded currency pair in the Forex market is the USD/JPY pair, also known as “trading the gopher.” This pair has traditionally been sensitive to the existing political sentiment between countries in the Far East and the United States. This currency pair exhibits a positive correlation to the USD/CAD and the USD/CHF currency pairs because the US dollar is the base currency in the three pairs. 

GBP/USD - Trading the "Cable" 

“Trading the cable” refers to buying or selling of the GBP/USD currency pair. This currency pair tends to have a positive correlation to the EUR/USD currency pair and a negative correlation to the USD/CHF. This is a result of the positive correlation that exists between the euro, the pound and the Swiss franc. 

USD/CAD 

The USD/CAD pair is another popular choice or traders looking for currency pairs for trading. This currency pair exhibits a negative correlation to the GBP/USD, EUR/USD and AUD/USD pairs because these other pairs feature the US dollar as their quote currency. 

USD/CHF - Trading the " 

“Trading the Swissie” is an industry term for the buying and selling of the USD/CHF currency pair. This currency pair tends to correlate negatively with the GBP/USD and the EUR/USD currency pairs. This is down to the strong positive correlation which exists between the euro, Swiss franc and the British pound. For so long, the franc has been seen by Forex traders as a safe haven during periods of political upheaval. 

AUD/USD - Trading the "Aussie" 

The AUD/USD pair is one that has a strongly negative correlation with the USD/CHF, USD/JPY and the USD/CAD pairs since the US dollar is the quote currency. Besides this, the currency pair’s correlation with the USD/CAD is heavily influenced by the fact that Australian and Canadian dollars have a positive correlation to each other since they are both commodity block currencies. 

Conclusion 

The Forex market is the largest and most liquid of the world’s financial markets, involving millions of parties and the exchange of trillions of dollars’ worth of value every single day. As we have made clear, each of the world’s major currencies, and currency pairs for trading, has its own unique features and benefits, which have an effect on its price movements and underlying value, relative to other currencies. By understanding the reasons why the values of currencies change relative to each other, you will take a pivotal and legitimate step toward success in the Forex trade.