Trading USD Majors in Forex

Trading is a science in itself & you need to know the basics if you wish to do well in it & stay focused for the long term. Jumping in it based on hunches & emotions is going to burn you out sooner than later. Trust me I learnt that lesson the hard way. With the kind of leverage available in FX trading you will wipe off your account in no time. OK, enough lecturing let’s talk about something tangible.

I will mostly look at the USD Majors (which I trade in) — the 7 most traded USD crosses in Forex. These 7 pairs account for more than 70% of the trading volume ( $5.0+ Trillion) in the currency markets around the world. All these pairs generally have lower spreads, high liquidity & present opportunities to trade 24/7. Also economic growth, interest rate differentials & Equities performance are some of the common factors which affect each of these pairs. Keep in mind though, USD being the Reserve currency of the world impacts all these pairs in one way or the other. However, individual pairs exhibit their own characteristics as well. Let’s explore them.

EURUSD: is the most popular, most liquid & hence the most traded pair over all the OTC Forex exchanges since we have the top currencies of the world paired against each other. By volume it makes up around 30% of the total trading volume for FX transactions around world. The pair represents the exchange rate of Euro (or single currency of the European Union) against USD (Greenback or the US Dollar).

• EURUSD is considered a Risk bearing pair which traditionally does well with global growth, equities boom & increased demand for investment.
• The pair generally tends to move in the same direction as its European counterpart, the Pound or GBPUSD over Medium to Long term periods.
• One of the more volatile pairs with the biggest moves coming between 0300–0530 & 0830–1100 ET
• The daily Average True Range (ATR) is 100–120 pips
• The usual spread is between 1–2 pips

USDJPY: Another popular pair in which Greenback is paired against the Japanese Yen. Second most traded pair in the World accounting for around 16–18% of the total FX trading volume.

• USDJPY is the sentiment bearing pair for the US Dollar since it accurately predicts the general bullishness or bearishness of the Greenback. Positive sentiment in Equities pushes the pair higher while Risk off brings it down. Also if you are looking to trade data releases (which I don’t recommend), this pair provides the most logical reaction in USD
• The correlation of this pair is striking with USDCHF since both of them are considered safe havens in times of market distress. Both move in tandem
• Most active time to trade this pair is between 2000–2230 & 0830–1100 ET
• The daily Average True Range (ATR) is 80–90 pips
• The usual spread is between 2–3 pips

GBPUSD: British Pound (or Cable) paired against the USD. Third most traded pair in the FX markets with a volume of around 10–12% of the total volume.

• GBPUSD is also a Risk bearing pair which tends to do well with the conducive economic environment in Europe generally & UK specifically
• It is the most volatile of the Major pairs with the most active times to trade from 0300–0530 & 0830–1100 ET
• The pair has a positive correlation with EURUSD — generally move in the same direction
• The daily Average True Range (ATR) is 120–140 pips
• The usual spread is between 1–2 pips

USDCAD: One of the stars of the commodity pairs where Canadian Dollar (or Loonie) is paired against the Greenback & accounts for around 5% of the total volume of FX traded over the counter.

• USDCAD is an export oriented pair therefore the trade between US/Canada has a huge impact on the price movement of this pair. Economic conditions in US (biggest trading partner) greatly impact this pair since more than 60% of Canada’s exports are destined there
• The pair has a significant negative correlation with the price of oil (biggest export) & both tend to move in opposite direction. Simply put if Oil prices go down the pair moves up & vice versa
• Most active time to trade this pair is between 0800–1130 ET
• The daily Average True Range (ATR) is 80–90 pips
• The usual spread is between 3–4 pips

AUDUSD: This pair in which Australian Dollar (or Aussie) is paired against the USD accounts for about 6% of the total volume of FX transactions worldwide. Another bigwig of the commodity trio.

• AUDUSD is also heavily export dependent pair with emphasis on commodities. The economic conditions in China bear a major impact on the price movements of this pair since it is the biggest trading partner of Australia & receiver of commodities (Gold, Silver, Copper etc.)
• The pair has a positive correlation with the currency pair of its neighbor — NZDUSD which is also a commodity pair
• Most active time to trade this pair is between 2000–2330 & 0830–1100 ET
• The daily Average True Range (ATR) is 60–70 pips
• The usual spread is between 3–4 pips

USDCHF: This is the second safe haven pair in which USD is paired against Swiss Frank (or Swissie). The pair accounts for about 4% of the total FX transactions volume worldwide.

• USDCHF tends to do well in times of positive Risk sentiment & moves down with distress in markets. Swiss Central Bank (SNB) also has a reputation of interfering in FX markets to manipulate the exchange rate unlike other central banks
• It tends to move in the same direction as its other safe haven counterpart USDJPY reinforcing the positive correlation
• Most active time to trade this pair is between 0300–0500 & 0830–1100 ET
• The daily Average True Range (ATR) is 60–70 pips
• The usual spread is between 4–5 pips

NZDUSD: Last of the Majors & the commodity pairs in which New Zealand Dollar (or Kiwi) is paired against the Greenback. This pair accounts for about 2% of the total FX volume traded.

• NZDUSD also tends to do well with the commodities upswing. Global demand for commodities bodes well for the pair & vice versa. Small size of the economy means bigger moves in the exchange rate in case of global demand changes
• The pair has a positive correlation with AUDUSD — currency pair of its neighbor & biggest trading partner
• Most active time to trade this pair is between 2000–2330 & 0830–1100 ET
• The daily Average True Range (ATR) is 50–60 pips
• The usual spread is between 4–5 pips

Hope you found the information useful. Always open to any comments or feedback. Before signing off here’s something on the lighter side to show the recent upswing in the Greenback against its counterparts

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Originally published at medium.com on May 24, 2018.