The Best Forex Currency Pairs to Trade

Forex trading has grown in popularity in recent years as it provides traders with access to the foreign exchange market and the use of leveraged trading with lower margin requirements than the stock market. The Forex market is also the largest and most liquid market in the world, with a daily trading volume in 2024 of nearly $7.5 trillion. This makes the Forex market an ideal place for traders seeking highly leveraged trades.

However, before entering the fast-paced world of Forex, you need to understand the most popular currency pairs and how to trade them. In this article, we'll look at the top forex currency pairs you need to know about.

What is a currency pair?

A currency pair combines the currencies of two countries. Each currency has its own value and the relationship between these values affects the price of the currency pair. So does the interest of the trader.

Currencies are always traded in pairs because when you buy or sell one currency, you automatically sell or buy another. For example, consider paying in US dollars when you buy a foreign currency while traveling abroad.

In each currency pair, there is a base currency and a quote currency. The base currency is the first currency shown on the left. The quote currency is the second currency on the right.

The price of a currency pair is the amount of the quoted currency needed to buy one unit of the base currency.

For example, for the EUR/USD currency pair, EUR is the base currency and USD is the quote currency. A currency pair price of 1.1000 means that it takes 1.20 USD to buy one euro.

Top Forex Currency Pairs

The most popular currency pairs traded in the forex market include the following:

EUR/USD (Euro/US dollar)

The EUR/USD is the most traded currency pair in the market, with EUR/USD trading accounting for 24.0% of daily forex transactions in 2024.1 The EUR/USD pair is popular because it represents two of the world's major economies: the European Single Market and the United States.

The high daily trading volume of EUR/USD ensures that there is a lot of liquidity in the pair, which typically results in smaller spreads. Liquidity and small spreads are attractive to traders as they mean that large trades can be made without affecting the market too much.

The EUR/USD exchange rate is determined by a number of factors, the most important of which are the interest rates set by the European Central Bank (ECB) and the US Federal Reserve (Fed). This is because currencies with higher interest rates are usually in higher demand, as higher interest rates provide a better return on their initial investment. For example, if the ECB sets a higher interest rate than the Fed, the Euro is likely to appreciate against the US Dollar.

USD/JPY (US dollar/Japanese yen)

The USD/JPY pair, also known as the ‘gopher’, consists of the US dollar and the Japanese yen. It is the second most traded FX pair in the market, accounting for 13.2% of all daily FX transactions in 2024.

Similar to EUR/USD, USD/JPY is known for its high liquidity, as the Japanese Yen is the most actively traded currency in Asia and the US Dollar is the most frequently traded currency in the world.

Similar to the Federal Reserve and the European Central Bank, the Bank of Japan (BoJ) sets interest rates for the Japanese economy, which in turn affects the value of the yen relative to the dollar.

GBP/USD (British pound/US dollar)

The currencies in this pair are the pound sterling and the US dollar. GBP/USD is colloquially called ‘cable’ on account of the deep-sea cables that used to deliver the bid and ask quotes between London and New York. In 2024, the GBP/USD pair made up 9.6% of all daily forex transactions.

Like with most other currency pairs, the strength of GBP/USD comes from the respective strength of the British and American economies. If the British economy is growing at a faster rate than that of America, it is likely the pound will strengthen against the dollar. However, if the American economy is doing better than the British economy, the reverse is true.

As with the first two most popular currency pairs on this list, the GBP/USD quote is influenced by the interest rates set by the Bank of England (BoE) and the Federal Reserve respectively. The difference in interest rates between the GBP and USD can have a significant impact on the price of the GBP/USD pair.

AUD/USD (Australian dollar/US dollar)

AUD/USD, sometimes referred to as ‘Aussie dollars’, represents the Australian dollar against the US dollar.In 2024, AUD/USD accounted for 5.4 per cent of daily foreign exchange transactions. The value of the Australian dollar is closely linked to the value of its exports, with metal and mineral exports such as iron ore and coal accounting for a significant portion of the country's gross domestic product (GDP).

A fall in the value of these commodities on the world market could lead to a fall in the value of the Australian dollar. In the case of the AUD/USD pair, this means that the US dollar will strengthen, so it will cost less US dollars to buy one Australian dollar.

As with the previously mentioned currency pairs, the AUD/USD exchange rate is also affected by the difference in interest rates between the Reserve Bank of Australia (RBA) and the Federal Reserve. For example, if US interest rates are lower, the US Dollar may weaken against the Australian Dollar and it will cost more US Dollars to buy one Australian Dollar.

USD/CHF (US dollar/Swiss franc)

The USD/CHF currency pair is made up of the US dollar and the Swiss franc and is commonly known as the ‘Swissie’. USD/CHF is a popular currency pair because the Swiss financial system has historically been a safe haven for investors and their capital.

As a result, traders often turn to CHF during times of increasing market volatility, but the Swiss franc will typically see less interest from traders during times of greater market stability. During times of increased volatility, it is likely the price of this pair would drop as CHF strengthens against the USD after experiencing increased investment.

Since CHF is turned to primarily during times of economic volatility or as a safe haven, it is not as actively traded as the five preceding currency pairs on this list. However, USD/CHF still accounted for 3.6% of all daily forex transactions in 2024.

USD/CAD (US dollar/Canadian dollar)

The USD/CAD is often referred to as the ‘loonie’ because of the submerged bird that appears on the Canadian dollar coin, which represents the pairing of the US dollar and the Canadian dollar.1 The strength of the Canadian dollar is closely linked to the price of oil, which is Canada's main export.

Since oil is denominated in U.S. dollars on the world market, Canada can earn a lot of dollars from oil exports. Therefore, if oil prices rise, the value of the Canadian dollar is likely to strengthen against the United States dollar.

In general, when oil prices rise, the dollar usually weakens because if the dollar weakens, more dollars must be exchanged for other currencies in order to buy the same amount of oil as before. On the flip side, higher oil prices mean that the Canadian dollar is likely to strengthen because the link between the Canadian dollar and the price of oil is very strong.

Therefore, traders should keep a close eye on the price of Brent Crude and U.S. Crude when trading USD/CAD, as any fluctuations in the oil market could have an impact on the exchange rate of this foreign exchange pair.

USD/CNY

The USD/CNY currency pair is the partnership of the US dollar and the Chinese renminbi – commonly known as the yuan – which represented 4.1% of daily forex trades in 2024.

The yuan has largely been decreasing relative to the US dollar since the start of the US-China trade war. This has been due in part to the Chinese government, which has let the yuan depreciate in the knowledge that this will make the countrys exports cheaper and increase their already sizable market share in countries other than the US.

You can trade the USD/CNH currency pair – CNH being the offshore version of the yuan that is traded outside of mainland China. Yuan is referred to as CNY only when it is traded in the onshore Chinese market. CNH has traditionally not been as tightly controlled as CNY by the Chinese government, which means it can be more volatile. This volatility can make it a better choice for speculative trading.

Traders should keep an eye on the US-China trade war as any developments are likely to affect the price of this currency pair.

FAQ

Why Is the EUR/USD Called the Fiber?

It's considered by many to be an innovation update on the nickname “Cable” given to GBP/USD due to the steel cables laid across the seabed of the Atlantic Ocean in the 19th Century to facilitate communications between the U.S. and Great Britain. In other words, then it was cables. Now it would be fiber optics.

Why Is the EUR/USD the Most Popular Currency Pair?

The U.S. currency is the most actively traded currency in the world. The euro is also highly traded. The reason for this is the perceived stability and strength of their economies and political environments. Because of this, the currency pair is the most viable for trading purposes.

Why Do Many of the Top Currency Pairs Include the USD?

Such pairings occur because of the strength of the American economy plus the power and stability of the government that backs the U.S. dollar.