The biggest currency exchange market in the world, the Forex market, roughly trades around $5.1 trillion every day. With its volatile and complex nature, it is often compared to a black box. The Forex market sees high fluctuations in currency rates, and currency trading takes place 24 hours a day across the world’s various time zones. More than 180 currencies are traded in the four major time zones in the Forex market, namely the European Zone, Australian Zone, Asian Zone, and the North American Zone. The currencies are traded in pairs, and they are usually priced against the US Dollar (USD). Now the question arises which of these 180 currencies are performing best this year. Before that, we need to see what makes a good currency pair.
Types of forex currency pairs
There are basically three types of forex currency pairs –
- Majors: This is the most commonly used currency pair in forex trading. The majors are generally considered to be the most liquid currency pairs, and they almost always include the USD. However, these pairs can also be crowded, and the trading can be quite competitive given that it is easier to research on majors.
- Minors: These currency pairs include one of the major currencies of the world besides USD. They usually consist of Euro, British Pound, or the Yen. There is generally lesser data available on these pairs, and they have a lower level of liquidity. Trading in minors is generally less competitive.
- Crosses: Crosses also do not include the USD. The only difference between crosses and minors is that they do not necessarily include the major currencies of the world. A cross can comprise any non-USD currency. This means that minors are a form of cross.
Qualities of a good currency pair
To determine the performance of a currency pair in the forex market, there are certain qualities that should be taken into account.
- Liquidity: This refers to how easily the currency pair can be bought or sold.
- Price Stability: For a currency, price stability is generally linked to the economic scenario of a country.
- Predictability: For the majors, there is a large amount of data available which indicates how the currency pairs will perform. However, the predictability decreases for the minor currency pairs because of a lack of historical and performance data.
Most valued currency pairs in the forex market in 2021
1. The Gopher (USD/JPY)
The Gopher is one of the most popular forex currency pairs in the world. It is a combination of the Japanese Yen (JPY) and US Dollar (USD). In recent years, it has gained popularity in 2021 because of the prominence of the Japanese Yen in Asia and that of the US Dollar all over the world. The currency pair has high liquidity, and as a result it can be traded in high volumes without much fluctuation in its exchange rate prices. It has a margin rate of 3.3% and a minimum spread of 0.7 points.
2. The Fiber (EUR/USD)
The Fiber is a currency pair that is widely traded throughout the world. This currency pair is a combination of the US Dollar (USD) and Euro (EUR). It is considered to be the most popular currency pair of 2021 as it comes from the world’s most powerful economies, the United States and the European Union. This currency pair also boasts of high liquidity and very low spread. For small and frequent earnings, this currency pair presents a wide variety of trading opportunities (and risks). It also has a margin rate of 3.3% and a minimum spread of 0.7 points.
3. The Cable (GBP/USD)
The Cable is a currency pair that comprises the US Dollar (USD) and the British Pound Sterling (GBP). This currency pair is quite volatile because of frequent price fluctuations. Some day traders prefer this currency pair, as it’s able to be traded in the short term. It has a margin rate of 3.3% and a minimum spread of 0.9 points.
4. The Chunnel (EUR/GBP)
This currency pair plays on the words ‘Channel Tunnel’, which connects Great Britain with the European mainland. The Chunnel comprises British Pound Sterling (GBP) and the Euro (EUR). Give the history these regions have with trade, this pair is considered to be very strong and interesting for skilled traders. This is also quite volatile, like many other currency pairs. It has a margin rate of 3.3% and a minimum spread of 1.1 points.
5. The Swissie (USD/CHF)
This currency pair is a combination of the Swiss franc (CHF) and US Dollar (USD). It is widely known that the Swiss franc is quite low in market volatility. This Swissie is considered to be one of the most stable currency pairs, which may be attractive to some trading strategies. It has a margin rate of 3.3% and a minimum spread of 2.5 points.