The currency pairs with the largest volume of trading and greatest liquidity in the Forex market are the majors. They constitute by far the largest portion of all trading along with combinations of them, such as EUR/USD, GBP/USD, USD/CHF, USD/CAD, NZD/USD, USD/JPY, AUD/USD. Those pairs also have the highest number of sellers and buyers, so therefore the tightest spreads usually apply to them.
Macroeconomic events that impact the market are not restricted to the countries of the major currencies, of course. Other currency pairs (“exotic pairs”) that attract speculation include Turkey with the USD/TRY combination (US Dollar/Turkish Lira), Mexico and its Peso (USD/MXN) and Norway’s Krona (USD/NOR) as just three examples.
Notes on EUR/USD trading
Two of the world’s largest economies are The US and Europe, specifically the Eurozone, so it’s no surprise that the EUR/USD is the single most traded pair in Forex. Estimates put the volume of the pair at approximately 25 percent of the total daily Forex volume. That’s roughly 5 trillion US Dollars every day. It means that even novice traders with only a beginner’s grasp of the economic factors involved can form an opinion on the likely up or down direction of either of those economies.
Major economic events occurring in the Eurozone and the resulting market movements have attracted tremendous global investor interest in trading the EUR/USD pair because Forex thrives on movement. One outstanding example was the debt crisis in Greece. The turmoil in that country saw hugely significant events follow one after the other. Things like bailouts, austerity measures and various economic policy decisions generated extreme volatility in the country and in the markets. When the latest economic policy announcement indicated a likely negative outcome for Greece, some traders would sell the EUR/USD pair expecting that the value of the Euro would tumble in relation to the Dollar. Other traders took an opposing view, expecting the measures to introduce stability that would raise the relative value of the Euro and so they would buy EUR/USD.
Another intriguing event for EUR/USD was the Brexit referendum in the UK. Traders took a view on the likely outcome of the voting and how that would impact on the value of the Euro in relation to a relatively steady and non-impacted Dollar.
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