So what are the 3 main types of currency pair?
Spreadbetting FX Currency Pairs
1. Forex Majors
Something approaching 85% of the FX market trading is accounted for by the forex majors. The majors all include the United States Dollar, with the Cable, Eurodollar, USD-CHF and USD-JPY being the most popular pairs by volume.
You can find the tightest spreads in spread betting when you trade the major pairs. This is because the trading volume gives these FX pairs high liquidity. This also makes the pairs popular with day traders.
Major currency pairs do become more volatile at certain times of day, however. Particularly when the larger exchanges in Europe and North America are closed for trading. Forex majors such as the Eurodollar are a good place for beginners to start.
2. Cross Pairs
Next up from the FX major pairs are the cross pairs. These still include the major currencies, but not the United States Dollar. The most consistently traded of these are the Japanese Yen, the Euro and Pound Sterling.
Some of the cross pairs may benefit from higher liquidity than major pairs because of a high level of activity from institutional investors. For instance the US Dollar/Swiss Franc pair often has a higher liquidity than US Dollar/Swiss Franc.
The most frequently traded crosses are:
• EUR/GBP: Traditionally this pair offers low volatility.
• EUR/CHF: (In)famously, the SNB removed the Swiss Franc’s pegging to the Euro in 2014, causing massive losses for some Forex traders.
• CAD/JPY: This cross will generally follow oil price fluctuations due to Japan being an importer and Canada an exporter of the commodity.
• EUR/JPY: Popular with those also trading the EUR/USD.
• NZD/JPY: Big with carry traders chasing gains via the interest rate differential.
Exotic pairs are usually include currencies from emerging or developing nations. Symbols such as the BRL, ZAR and TRY are particularly popular. Because of lower trading volumes and typically less stable economic and political environments, the exotic pairs can add a high level of uncertainty to FX trading.
That said, a slower pace of trade due to low volumes can make price movements more predictable. Spreads will almost always be significantly wider when trading these currency pairs.