Chapter 8
Getting to Know the Major Currency Pairs
IN THIS CHAPTER
Looking at the euro and the U.S. dollar
Checking out the U.S. dollar and the Japanese yen
Understanding the British pound and the Australian dollar
Studying forex positioning data
The vast majority of trading volume takes place in the major currency pairs: EUR/USD, USD/JPY, GBP/USD, and USD/CHF. These currency pairs account for about two-thirds of daily trading volume in the market and are the most watched barometers of the overall forex market. When you hear about the dollar rising or falling, it’s usually referring to the dollar against these other currencies.
Even though these four pairs are routinely grouped together as the major currency pairs, each currency pair represents an individual economic and political relationship. In this chapter, we look at the fundamental drivers of each currency pair to see what moves them. We also look at the market’s quoting conventions and what they mean for margin-based trading.
Although it’s important to understand why a currency rate moves, we think it’s also essential to ...
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