#5: What is a major currency
Lesson 5
What is a major currency
Major Currency pairs are currencies with the most trading volume against the US Dollar.
Here’s a list of them:
Out of all forex pairs…
EUR/USD is the most heavily traded with the most trading volume.
Because it involves 2 economic powerhouses – the United States and the Eurozone.
Next…
Benefits of trading the major currency pairs
The Major Currency pairs are better to trade with.
And here’s why…
These markets are liquid, so you can enter and exit your trades with minimal slippage.
Their spreads are also tighter, so your transaction costs are lower.
How to use Major Currencies to identify strength and weakness of the US Dollar
The Major Currency pairs are all linked to the US Dollar.
And the price movements of these pairs allow you to understand the US dollar better.
Let me explain...
#1: How to identify strength of the US Dollar
US Dollar is strong if you notice these Major Currencies in a downtrend:
- EUR/USD
- GBP/USD
- AUD/USD
- NZD/USD
Why?
Because as these major currency pairs decline, you now need less USD to get 1 unit of the EUR, GBP, AUD or NZD.
Next…
#2: How to identify weakness of the US Dollar
Likewise…
The US Dollar is weak if you see these Major Currencies in an uptrend:
- EUR/USD
- GBP/USD
- AUD/USD
- NZD/USD
Because as these major currency pairs rise, you now need more USD to get 1 unit of EUR, GBP, AUD or NZD.