Before you start to trade in the Forex market try here to understand the major currency pairs and how to trade on them.
The EUR/USD is the way of representing the value of the Euro against that of the US dollar. If the value of EUR/USD is 1.3 then this shows that to buy one Euro you need to spend 1.3 Dollars. In the Forex language it denoted as “trading the Euro” and even though there are many other currencies that are traded against the Euro this is the one that is majorly traded.
The traders in EUR/USD will watch the economic factors that impact the UnitesStatesandthe Eurozone closely. They also look at the difference in the interest rates that is established between the European central bank and the US Federal Reserve. When you trade the EUR/USD you can derive correlation from the GBP/USD as both the currency pairs are traded against the USdollars. The economy of the United Kingdom plays a key role in the trend that is seen in the Eurozone.
The second most popularly traded currency is the USD/JPY. This is the value of us dollar against the value of the Yen which is the Japanese currency. When one says that he is “trading the Dollar-Yen” then this means that he is trading USD/JPY
Those who trade on this currency pair need to watch the economy of Japan closely. They also need to be aware of of-of any release by the country’s central bank. The USD/JPY is highly correlated with the USD/CHF a both these trade against the US dollars.
The GBP/USD is the value of the Britishpoundthatis traded against the USDollars. “Trading the PoundSterling” is what is said when trading in GBP/USD.
Any major change in the economic trades of the UK and any policy statement that is released by the bank have to be watched closely. Consumer inflation tends to affect the British Pound and high inflation leads to an increase in the interest rates and vice versa.
The USD/CHF is the value of the US dollars against the Swiss Franc. This currency pair is referred to as “trading in Swissy”.
The development in the economy of Switzerland and any public policy statements closely watched to trade in this currency pair. TheSwiss Franc is a safe haven and the currency tends to fall when the global economy is stable and rises when there is an uncertainty in the economy.