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How to Trade Major Currency Pairs – Part 2

Major currency pairs are some of the most popular trading instruments in forex. Studying the pairs in detail could help you get a better understanding of the factors that can affect their prices and allow you to trade the instruments with more confidence.

USD/CHF

This pair represents the US dollar against the Swiss franc. The Swiss franc is often seen as a haven currency because it tends towards stability. This largely prevents drastic fluctuations in the exchange rate. It is for this reason that the pair has been seen as a good choice for traders who are looking for a more stable investment, especially in times of high volatility in other parts of the world.

USD/CAD

The pair compares the US dollar against the Canadian dollar and is one of the most popular currency pairs in the world. This is due to the high degree of cross-border trading activity that occurs between these two large neighboring nations. The Canadian dollar is a commodity currency and is therefore highly dependent on world oil and natural gas prices. Most energy commodities flow from Canada to the United States, while almost half of Canada’s imports come from the United States. The trade relationship between the two countries carries the potential to influence the stability of their exchange rate.

AUD/USD

AUD/USD represents the Australian dollar against the US dollar. Like the New Zealand dollar and the Canadian dollar, the AUD is a commodity currency, so its value depends mainly on the price of commodity exports, such as minerals and agricultural products. The AUD’s high liquidity makes it an attractive option for carry trades as it is a currency with high yields. The pair is largely affected by the interest rate spread between the Reserve Bank of Australia and the Federal Reserve (Fed) and both institutions’ announcements. AUD/USD remains one of the most popular currency pairs in the world due to its ability to trade actively during the Asia-Pacific trading sessions.

NZD/USD

This currency pair compares the New Zealand dollar against the US dollar. Like USD/CAD, AUD/USD, and NZD/USD, NZD/USD is considered a commodity pair. This means that the exchange rate of the pair is affected by the current market value of an underlying commodity. The NZD has benefited in the past from a multi-decade commodity boom that caused its value to soar so high that the Reserve Bank of New Zealand was forced to introduce devaluation measures in 2012. The NZD/USD is also influenced by the interest rate differential between the Reserve Bank of New Zealand (RBNZ) and the Federal Reserve (Fed).

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