Which forex is best for trading?
The best Forex pairs to trade
Forex is the world's largest and most volatile market, with hundreds of currency pairs. Because you can instantly sell or buy another currency when you buy or sell one, currencies are always exchanged in pairs. There are two currencies in every currency pair: a base currency and a quotation currency. The base currency always comes first, and the quote currency always comes after. The amount of the quote currency you must spend to buy one unit of the base currency is shown as the price for each currency pair.
The most popular forex currency pair is EUR/USD, which accounts for 24.0% of all forex trades made daily in 2019. The appeal of the EUR/USD pair is due to its representation of the two largest economies in the world: the US and the European Union.
The Best Forex Pairs to Trade
These are the top currency pairings. This ranking is based on performance and popularity in the past.
EUR/USD
The daily volume of EUR/USD trades guarantees the pair's high liquidity, often producing narrow spreads. For traders, liquidity and tight spreads are alluring because they allow for the execution of huge trades with little disruption to the market.
The interest rates fixed by the US Federal Reserve and European Central Bank are only a few factors affecting the EUR/USD exchange rate (Fed). Because higher interest rates provide a better return on their initial investment, the currency with the higher interest rates will typically be in higher demand. The euro would probably strengthen against the dollar if, for example, the ECB had set interest rates higher than the Fed.
USD/JPY
The Japanese yen (JPY), which was created during the Meiji restoration in an effort to modernise and westernise the Japanese economy, is the official currency of Japan. The value of the yen drastically dropped after World War II, but it has since begun to gently recover after reaching a trough following the 1973 oil crisis.
The US dollar and the Japanese yen make up the USD/JPY currency pair, popularly known as "the gopher." It is the second-most traded forex pair on the market in 2019 with 13.2% of all daily forex transactions. The Japanese yen is the most traded currency in Asia, and the US dollar is the most traded currency overall. USD/JPY is recognised for its strong liquidity, much as EUR/USD.
USD/CAD
It should not be surprising that the values of the CAD and the USD are tightly correlated as Canada is America's northern neighbour in terms of finances and one of their most significant trading partners. Additionally, there is a strong correlation between the Canadian dollar's value and commodity prices.
As a result of Canada's reliance on oil exports, the price of oil, in particular, has a huge impact on the value of the Canadian dollar. In 2016, the Canadian dollar also suffered, falling to an exchange rate of 1.46 CAD to 1 USD, while oil prices dropped to levels not seen in more than a decade.
Canada may make a sizable amount of US dollars through its oil exports because oil is valued in US dollars on international markets. As a result, the Canadian dollar will likely appreciate relative to the US dollar if oil prices rise.
GBP/USD
The US dollar and the pound sterling are the two currencies in this pair. Due to the deep-sea cables that were once used to transmit the bid and ask prices between London and New York, the GBP/USD is also known as the "cable" pair. The GBP/USD pair accounted for 9.6% of the entire currency transactions in 2019.
The relative strength of the American and British economies is the primary driver of the GBP/USD currency pair's strength, as it is for the majority of other currency pairs. In the event that the British economy grows faster than the American one, the pound will likely gain ground against the dollar. However, if the American economy does better than the British economy, the opposite is true.
The Bank of England's (BoE) and Federal Reserve's (Fed) respective interest rates impact the GBP/USD quote price. The cost of the GBP/USD currency pair can be significantly impacted by the ensuing difference in interest rates between the pound and the dollar.
USD to CHF
Switzerland's national currency is called Swiss Franc (CHF). Most investors buy CHF to safeguard their assets during turbulent times. Most people view the CHF as a "safe-haven" currency.
This means that the CHF will typically increase in value during periods of financial instability while other currencies depreciate. The CHF will frequently depreciate as other currencies appreciate, on the other end of the spectrum. Except for the JPY, the CHF gained value throughout the Great Recession.
Due to their low volatility during periods of significant market changes, CHF and JPY are two of the most widely traded safe-haven currencies worldwide.
AUD to USD
The sixth most frequently traded currency pair is the Australian dollar (AUD), Australia's national currency. Due to the interdependence of the economies of Australia and Canada, the value of the AUD and CAD are closely related. Australia remains one of the world's top coal and iron ore exports. Hence the AUD has an inherent correlation with the forex market. The Australian dollar (AUD) dropped to a level not seen since the 1970s during the 2015 commodity downturn. You should anticipate keeping a close eye on the price of these essential commodities for the Australian economy if you're interested in owning AUD.
USD/CNY
The USD/CNY currency pair, combining the US dollar and the Chinese renminbi, or yuan, accounted for 4.1% of all forex trades in 2019. The yuan has been losing ground to the US dollar ever since the US-China trade war started. This is partially due to the Chinese government, which permitted the yuan to deteriorate knowing that doing so would reduce export costs and increase the country's already sizable market share in countries other than the US.
Investors should keep an eye on changes in the US-China trade war since they may have an effect on how much this currency pair is worth.
USD/HKD
The Hong Kong dollar is compared to the US dollar using USD/HKD. From 2016 to 2019, this pair's trading volume doubled, from 1.5% to 3.3% of all daily currency transactions.
The protests in Hong Kong that dominated 2019 may have contributed to the increase. The Fugitive Offenders Amendment Bill's attempted adoption and claims of police violence against the residents of Hong Kong were the causes of the protests. The protests started around a month before the data was gathered. Therefore it is likely that they had an impact on the USD/HKD trading volume. This might be partially explained by the fact that many traders and speculators concentrated on the Hong Kong dollar due to the heightened media attention, believing that any news from the city would impact the currency's value.
A linked exchange rate is a special arrangement that links the value of the Hong Kong dollar to the US dollar. The range in which the Hong Kong dollar may vary, and traders may profit from any price changes within this range.
USD/KRW
The US dollar is pitted against the South Korean won in the ninth pair on this list, USD/KRW. This is the first year that the USD/KRW pair has made it into a list of the top ten most traded currencies, and in 2019 it accounted for 1.9% of all daily forex transactions.
Since the turn of the century, South Korea's economy has expanded, and as of November 2019, it is now the fourth largest in Asia and the eleventh largest in the world. This may cause the increasing USD/KRW activity as traders and speculators look to gain exposure to markets other than Japan, China, and Hong Kong.
People sometimes refer to South Korea's tremendous economic growth as the Miracle on the Han River, especially following the end of the Korean War in 1953. Due to South Korea's membership in the G20, the OECD, and the UN, as well as its current capitalization of this growth, many market participants see South Korea and its currency as an intriguing investment prospect.
Conclusion
While EUR/USD dominates the daily volume of forex trades, traders have a variety of other viable and liquid currency pairings to pick from to turn a profit. Before selecting a currency pair to trade, traders should consider several factors. They should also conduct their own technical and fundamental analysis to determine whether the currency pair is a viable trading option at that specific time, depending on announcements from central banks or ongoing trade disputes.