Currency Pairs Exchange. The foreign exchange market or Forex is currently the most precious of all the financial and investment needs that exist in the world. Perhaps one of the main reasons for investing in this market is its simplicity: the investor buys a currency, let’s say the EUR, paying its value in a different currency, the USD, for example, and expecting to make a profit on the said currency.
Thus, every Forex operation is organized around a currency pair. In the case of the example that we present, it would be the EUR/USD. Of course, in addition to this one, perhaps the most traded, there are many other possible currency pairs, an almost infinite combination.
Below, we present the pairs most invested today, their characteristics and some tips if you start trading with them, either directly in Forex or through derivative products such as CFDs.
Of all those that we are going to show you, the pair formed by Bitcoin and the US dollar is the one that is experiencing the greatest boom today. The obvious thing, taking into account the popularity that this cryptocurrency is reaching throughout the world:
Characteristics– The enormous volatility of this currency pair is its most characteristic feature. So much so that this pair has suffered intraday movements of more than 100% of its value.
It isn’t easy to anticipate its sudden and very fast movements. Hence it can also bring huge benefits.
Influencing Factors– Without a doubt, the biggest factor influencing BTC/USD is the degree of ‘optimism’ in the market regarding the future of Bitcoin. – Although, to a lesser extent, any other factor that influences the USD ( oil price, macroeconomic data, North American political events, etc.) The more doubts raise about the possibility of Bitcoin becoming a currency in common use, the more the price will fall, and vice versa.
It can also influence the price movement.
In the long term and buying Bitcoins denominated in US dollars, the outlay can become important.
Trying to benefit from short movements through technical analysis and derivative products such as CFDs do not require a large initial investment.
These three are the currency pair par excellence since it can easily say that they are the currencies that ‘dominate’ the first western world:
Features– Huge liquidity, with millions of euros, sterling pounds or dollars in international transactions every hour.
Security. It’s hard to see wild swings in a currency pair from entrenched systems like the Euro and US Dollar.
Influencing factors– Basically, any political, social, economic or natural aspect affects the systems of the United States and Europe to a greater or lesser extent, even if not directly.
The price of oil, for example. Is extremely important, as well as the moments of a temporary political crisis that are usually experienc on both sides of the Atlantic Ocean.
EUR/USD, EUR/GBP, GBP/JPY, and GBP/USD are probably not the place to trade if you are looking for quick and big profits as their volatility are not as great as that of other pairs.
Despite this. Any investment method is valid for these pairs, partly thanks to their security.
Suppose one has a good analytical base of the political, social, and economic realities, with a good fundamental analysis. In that case, it can be a good idea to apply it to this type of pair.
The Canadian dollar has a strong relationship US dollar. And therefore many of the events that involve movements in the CAD also affect the USD:
Characteristics– Security and liquidity are not suitable for other pairs’ shocks.
Influencing Factors– The USD tends to be heavily influenced by the CAD. And hence it may be one of the biggest influencing factors on this pair.
As with other higher safety pairs. Fundamental analysis and long-term trading may be better suited to trading this pair.
It is a curious case in the pair formed by the euro and the Swiss franc. Since the Swiss currency is a refuge value. It usually rises in value when the others fall:
Characteristics– Mainly the world and European financial and economic situation.
Influencing factors– As we said, situations of mistrust or financial and economic concern are usually accompanied by a strengthening of the CHF. Not only for the rest of the currencies.
You should also pay close attention to the interest rates of the respective currencies, the Bank of Switzerland and the European Central Bank. Which mark the path of the price of both currencies.
As a refuge value, you can trade futures contracts on the EUR/CHF by selling the single European currency, thus covering expenses due to financial storms.
The yen is the great Asian currency of the foreign exchange market. Since the Chinese state exercises great control over investment in Forex. Thus, their pairs are of great importance. Especially in their crosses with major Western currencies:
Characteristics- The yen’s situation is often a bit disparate. And it lives in a different world from Western currencies. Hence it needs further study.
Influencing factors– A clear example of what can affect the GBP/JPY is the recent Fukushima disaster, which saw the Japanese currency fall irretrievably against the British pound.
The Bank of Japan’s policies is another fundamental factor in this pair.
This type of pair accepts any application. Still. Special care must be taken to safeguard capital. Against sudden falls caused by events on one side of the world or the other. Which can affect this pair very differently.
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