28 major currency pairs represent a system that includes a combination of eight currencies. 21 of these pairs represent exotic pairs that do not include the USD either on the left or right side of the pair. These are the EUR/JPY or AUD/CAD. The most-traded exotic pairs are the EUR/JPY and EUR/GBP.
7 other pairs are major ones and with the largest trading volume.
Be aware of the difference between major currencies and pairs. Traders on the Forex market inevitably come across currencies called “the major currencies”. This term indicates the most frequently traded currencies worldwide, and the list includes Euro (EUR), Dollar (USD), Japanese Yen (JPY), British Pound (GBP), Australian Dollar (AUD) typically), and the Swiss franc (CHF).
The nicknames of 7 major currencies
It is also essential to know the abbreviations and a nickname for each currency. These names are easy to use for research and are convenient when communicating with other Forex traders.
USD (US Dollar) – Greenback or Buck. The first nickname comes from the banknotes issued during the American Civil War in 1861, characterized by the color green on their backs. On the contrary, the origin of the nickname “Buck” is less obvious. It’s probably an abbreviation of the term “buckskin”, meaning chamois. Native Americans used this bargaining unit as a bargaining chip with Europeans during the border days (word attested since 1748).
GBP (Pound Sterling) – Sterling. The pound sterling is officially called the “pound sterling”. Sometimes we just use “pound” or “sterling”. In particular, the name “sterling” comes from when the pound sterling had a value equal to one pound of sterling silver.
EUR (Euro) – Single currency or Fiber. The nickname “single currency” comes from the fact that it is used in several states. The term “fiber” comes from the fact that this currency is made of pure cotton fibers.
CHF (Swiss Franc) – Swissy. Nickname for the Swiss franc, but also for the currency pair USD/CHF.
CAD (Canadian Dollar) – Loonie. A nickname that comes from the fact that the currency of one Canadian dollar has the image of a common loon (“loon” in English), a bird widespread in Canada.
AUD (Australian Dollar) – Aussie or Ozzie. This nickname originates from the fact that the term “Also” refers to an Australian. In particular, even the AUD/USD currency pair is nicknamed this way.
NZD (New Zealand Dollar) – Kiwi. This nickname comes from the national symbol of New Zealand, namely the “kiwi”, a kind of bird.
The US dollar is not in any cross currency pair. Previously, currencies had to be exchanged for US dollars before they could be exchanged for other currencies. The most popular cross pairs are EUR/GBP, EUR/JPY, and EUR/CHF.
This crossed pair EUR/GBP assesses the relationship between the UK economy and that of the European Union. Forecasting for the EUR/GBP pair can prove difficult due to the close connection between the two economies.
Commodity-related currency pairs
Commodity-linked currencies, such as the Australian dollar, Canadian dollar, and New Zealand dollar, form major currency pairs heavily influenced by commodity prices.
The price of the AUD/USD (Australian dollar / US dollar) pair, is strongly influenced by mining products, cattle breeding, wool, and wheat. On the other hand, the Australian dollar tends to do well when China’s economy is doing well due to the importance of trade between the two countries. The Central Bank of Australia (RBA) also exerts a major influence on the AUD/USD pair.
Factors that influence the price of 28 major currency pairs
The evolution of overnight interest rates by central banks, economic data, and politics are the main factors that are impacting the prices of 28 major currency pairs.
Volatility – As a general rule, traders open lower positions in more volatile currencies and higher positions in less volatile currencies. Volatility can impact any of these major currency pairs any time due to sudden economic changes and changes in interest rates, or political instability. It is important to follow these markets to keep abreast of the latest news and analysis.
Interest rates – central banks are responsible for preserving monetary and financial stability. To do this, they use their interest rates. Suppose a central bank raises its overnight interest rate. In that case, demand for its country’s currency increases as investors and traders crave that higher yield, which, in turn, strengthens that currency by comparison to others.
Economic Data – Economic data releases are reports that provide traders with insight into a nation’s economic landscape. Inflation, gross domestic product (GDP), retail sales, and the purchasing managers’ index (PMI), etc. are among the most important economic data.
Politics – Trade wars, corruption scandals, elections, and various policies cause instability, reflected in the foreign exchange market. The government can affect the economy, which can have a favorable or unfavorable effect on the relative value.