Major Currency Pairs Explained: A Beginner’s Forex Guide

Introduction

Major currency pairs are among the first markets encountered by people learning how to trade forex for beginners. Although every forex trade involves buying one currency and selling another, each pair responds differently to interest rates, economic data, political developments and changes in market sentiment.

Understanding these differences helps answer an important beginner question: How does forex trading work in practice? Traders are not simply predicting whether one currency will rise or fall. They are comparing the relative strength of two economies and deciding which currency may outperform the other.

This guide explains the characteristics of five widely followed major currency pairs: EUR/USD, GBP/USD, USD/JPY, AUD/USD and USD/CHF.

How Does Forex Trading Work with Currency Pairs?

Forex prices show the value of one currency relative to another.

In the pair EUR/USD:

• EUR is the base currency.

• USD is the quote currency.

• The quoted price shows how many US dollars are needed to buy one euro.

If EUR/USD rises, the euro is strengthening relative to the US dollar. If the pair falls, the US dollar is strengthening relative to the euro.

Traders can buy a pair when they expect the base currency to strengthen or sell it when they expect the base currency to weaken. However, currency prices can move quickly, and leveraged trading can magnify both gains and losses.

Before trading, beginners should understand:

• Base and quote currencies

• Bid and ask prices

• Spreads

• Position size

• Leverage and margin

• Stop-loss and take-profit orders

• Economic events that may affect each currency

The available markets can be reviewed on the DuraMarkets trading instruments page.

Major Currency Pairs at a Glance

Each major pair contains the US dollar alongside another widely traded currency. The table below summarises the principal influences affecting the five pairs covered in this guide.

These are broad tendencies rather than fixed rules. A pair’s behaviour can change when monetary policy, economic conditions or market expectations shift.

EUR/USD: What Moves the Euro and US Dollar?

EUR/USD represents the euro against the US dollar. It is one of the most closely followed currency pairs because it connects two of the world’s largest economic regions.

Its price is influenced by the difference between European Central Bank and US Federal Reserve policies. When markets expect US interest rates to remain higher than eurozone rates, the dollar may receive support. When the eurozone outlook improves relative to the US, the euro may strengthen.

Important EUR/USD drivers include:

• ECB and Federal Reserve interest-rate decisions

• Inflation reports

• Employment data

• Economic growth figures

• Business activity surveys

• Political developments within the eurozone

• Changes in demand for the US dollar

EUR/USD often attracts beginners because of its market activity and the availability of economic information. That does not make it easy to trade. Prices can move sharply around central-bank announcements, inflation reports and US employment data.

Traders should also remember that the eurozone includes multiple economies. Economic weakness in one member state may affect sentiment, but the pair usually responds most strongly to developments that could influence broader eurozone policy.

GBP/USD: Why Is the Pair Often Volatile?

GBP/USD measures the value of the British pound against the US dollar. The pair is commonly known as “cable,” a nickname connected to the historical transatlantic cable used to transmit exchange rates.

The pair can experience relatively sharp price movements because it responds to developments in both the UK and US economies. Political uncertainty, changing interest-rate expectations and unexpected economic data may all increase volatility.

Important GBP/USD drivers include:

• Bank of England decisions

• Federal Reserve decisions

• UK inflation and wage data

• UK gross domestic product

• US employment and inflation reports

• Elections and fiscal policy announcements

• Broader demand for the US dollar

A wider intraday trading range can create opportunities, but it also increases risk. Beginners should avoid assuming that a larger price movement automatically means a better trade.

Position size, stop placement and the amount risked per trade should be adjusted to current volatility. A stop-loss placed without considering the pair’s recent range may be triggered by ordinary price movement rather than a meaningful change in direction.

USD/JPY: How Do Interest Rates and Risk Sentiment Affect It?

USD/JPY represents the US dollar against the Japanese yen. It is particularly sensitive to interest-rate expectations and the difference between US and Japanese bond yields.

If US yields rise relative to Japanese yields, the dollar may become more attractive against the yen. If that difference narrows, USD/JPY may come under pressure.

Important USD/JPY drivers include:

• Federal Reserve policy

• Bank of Japan policy

• US Treasury yields

• Japanese government bond yields

• Inflation in Japan and the US

• Statements from Japanese authorities

• Changes in global risk sentiment

The Japanese yen is often described as a safe-haven currency because it may strengthen during periods of market stress. However, that relationship is not guaranteed. Interest-rate differences, government intervention concerns and changing capital flows can sometimes have a stronger influence.

Beginners should be especially careful when trading USD/JPY around central-bank meetings or comments from Japanese financial authorities. These events can produce rapid price changes.

AUD/USD: Why Is It Connected to Commodities and Asia?

AUD/USD measures the Australian dollar against the US dollar. The pair is often influenced by commodity markets because commodity exports form an important part of Australia’s economy.

Australia also has close trade links with Asian economies, particularly China. As a result, Chinese growth data and changes in global demand can influence expectations for the Australian economy.

Important AUD/USD drivers include:

• Reserve Bank of Australia decisions

• Federal Reserve policy

• Australian employment and inflation data

• Chinese economic indicators

• Iron ore and other commodity prices

• Global equity-market sentiment

• Expectations for worldwide economic growth

The Australian dollar is sometimes treated as a risk-sensitive currency. It may strengthen when investors are optimistic about global growth and weaken when markets become more defensive.

However, commodity prices and domestic monetary policy can cause the pair to behave differently from broader risk markets. Traders should confirm the current market driver instead of assuming that AUD/USD will always follow stocks or commodities.

USD/CHF: Why Is the Swiss Franc Considered Defensive?

USD/CHF represents the US dollar against the Swiss franc. Switzerland’s political stability, financial system and historical neutrality have contributed to the franc’s reputation as a defensive currency.

During periods of market uncertainty, demand for the Swiss franc may increase. In that situation, USD/CHF may fall as the franc strengthens against the dollar.

Important USD/CHF drivers include:

• Swiss National Bank policy

• Federal Reserve policy

• Inflation in Switzerland and the US

• Global financial uncertainty

• European economic conditions

• Demand for defensive currencies

• Central-bank intervention expectations

The Swiss National Bank has historically paid close attention to excessive strength in the franc because a stronger currency can affect exporters and imported inflation. Traders should therefore monitor official commentary rather than relying only on the currency’s safe-haven reputation.

USD/CHF may sometimes move in the opposite direction to EUR/USD, but the relationship is not exact or permanent. Each trade should be assessed using current price action and market conditions.

What Is Spread in Forex?

The spread in forex is the difference between the bid price and the ask price.

The bid is the price at which a trader can sell a currency pair. The ask is the price at which the trader can buy it. This difference represents part of the cost of entering a trade.

For example, suppose EUR/USD is quoted as:

• Bid: 1.0850

• Ask: 1.0852

The spread is 0.0002, or two pips.

Spreads can vary depending on:

• The currency pair

• Market liquidity

• Time of day

• Economic announcements

• Market volatility

• The account’s pricing structure

Major pairs often receive significant market participation, but this does not mean their spreads remain constant. Spreads may widen when liquidity declines or prices move rapidly.

Traders should compare the complete cost of trading, including both spreads and any separate commission. DuraMarkets’ current pricing information can be reviewed on the spreads and commissions page.

How Beginners Can Compare Major Currency Pairs

Beginners do not need to trade every available pair. Following a small number of markets can make it easier to understand their behaviour and the events that affect them.

Use the following criteria when comparing pairs.

Trading Hours

Currency pairs tend to be more active when the main financial centres associated with their currencies are open.

For example:

• EUR/USD and GBP/USD often receive more activity during the European and US sessions.

• USD/JPY can be active during both Asian and US trading hours.

• AUD/USD may respond strongly during the Asian session and when Chinese data is released.

Trading during active periods may provide more market participation, but important announcements can also create greater volatility.

Volatility

Volatility describes the size and frequency of price movements.

A more volatile pair may produce larger trading ranges, but it can also require wider stop-loss levels and smaller position sizes. Beginners should compare recent price ranges rather than assuming a pair always behaves in the same way.

Economic Calendar

Each currency responds to different data releases and central-bank decisions.

A trader following GBP/USD should monitor the Bank of England and UK economic releases. Someone following USD/JPY should pay attention to the Bank of Japan and changes in US Treasury yields.

Checking the calendar before placing a trade can help traders identify when volatility may increase.

Trading Costs

Compare:

• Typical spreads

• Commission

• Overnight swap charges

• Possible currency conversion costs

• Trading costs during volatile periods

The pair with the smallest advertised spread may not always be the least expensive when all costs are included.

Forex Trading Strategies for Major Currency Pairs

Different forex trading strategies may be applied to major pairs, but no strategy works in every market environment.

Trend Trading

Trend traders look for sustained movement in one direction. They may use market structure, moving averages or previous highs and lows to identify the trend.

A trend strategy may struggle when the market becomes range-bound or reverses after an economic announcement.

Range Trading

Range traders identify support and resistance areas and look for prices to remain within those boundaries.

This approach may be more suitable during quieter market conditions. It carries additional risk when a major event causes prices to break strongly beyond the range.

Breakout Trading

Breakout traders wait for price to move beyond an established support or resistance area.

A breakout may lead to continued movement, but false breakouts are common. Traders should define their entry, exit and risk level before placing the trade.

News-Based Trading

News traders focus on central-bank decisions, inflation data, employment reports and other market-moving events.

These events can create sharp price changes, wider spreads and slippage. Beginners should understand those risks before attempting to trade during an announcement.

No strategy removes market risk. Traders should test their approach, use controlled position sizes and avoid risking money they cannot afford to lose.

Which Major Currency Pair Should a Beginner Trade?

There is no single major currency pair that is suitable for every beginner.

EUR/USD is widely followed and has extensive market coverage, which can make it easier to research. However, it can still move unpredictably around economic releases.

GBP/USD may appeal to traders looking for greater movement, but its volatility can increase risk. USD/JPY can provide clear reactions to interest-rate expectations, although central-bank policy and intervention concerns may create sudden changes.

A beginner should choose a pair based on:

• Their available trading hours

• Their tolerance for volatility

• Their understanding of the relevant economies

• The pair’s total trading cost

• The strategy they intend to test

• The amount of capital they can reasonably risk

It is generally better to study one or two pairs consistently than to switch between many markets without understanding their drivers.

Explore Major Forex Pairs with DuraMarkets

Understanding a currency pair’s characteristics can help traders interpret price movements, but it cannot predict future results. Economic relationships change, and a pair may behave differently when monetary policy or market sentiment shifts.

Before trading, review the available trading platforms, compare the current account conditions in the trading account overview and confirm the costs associated with the instruments you intend to trade.

Once you understand the platform, pricing and risks involved, you can open a DuraMarkets forex account and begin exploring the major currency pairs that suit your trading approach.

Forex and CFD trading involves substantial risk. Leverage can magnify both gains and losses, and market behaviour can change without warning.