Trending Currency Pairs

In the forex market, trends represent how a currency pair’s exchange rate moves.

They can be divided into uptrends, downtrends, and sideways or range-bound movements. An uptrend signifies a consistent upward trend in a currency pair’s price over an extended period.

A downtrend is characterized by a continual decline in the currency pair’s price. Sideways or range-bound markets identify when a currency pair’s price remains within a defined range and lacks a clear direction.

Identifying Trending Currency Pairs

Numerous factors influence the trends in currency pairs. Economic big hitters such as interest rates, inflation rates, GDP growth, and employment statistics have a hefty say in determining currency values.

Also, such human sentiments, how investors act, and good old technical analysis spot and confirm trends.

Additional confirmation of trends is often sought through moving averages, trendlines, and chart patterns like triangles, flags, and head and shoulder formations.

Technical indicators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) can also determine any trend’s strength and momentum.

Major Currency Pairs: The Trendsetters

EUR/USD: The Dominant Duo

The EUR/USD currency pair is the most actively traded and liquid in the forex market. Any economic data from the Eurozone and the United States can significantly impact the EUR/USD pair.

Things like the difference in interest rates, GDP tendencies, and the political events in both places have a big say in how the pair moves.

USD/JPY: The Example of Stability

The USD/JPY pair delineates the correlation between the US dollar and the Japanese yen. Often regarded as a safe-haven pair, the Japanese yen tends to attract investors during market turbulence.

Such factors as interest rate differences between the US Federal Reserve and the Bank of Japan, economic data, and geopolitical changes in the Asia-Pacific region influence the USD/JPY pair.

GBP/USD: The Brexit Chronicle

The GBP/USD pair, known as Cable, reflects the relationship between the British pound sterling and the US dollar.

Economic information from the UK and the US, along with political shifts within the UK, including Brexit, has a hefty influence on this pair’s direction.

Following the Brexit referendum in 2016, the pair entered a downtrend, punctuated by periodic spikes and reversals driven by news and developments.

Traders closely monitoring Brexit-related news and identifying prevailing trends had the opportunity to profit from the pair’s volatile movements.

AUD/USD: The Commodity Currency Connection

The AUD/USD pair signifies the connection between the Australian and US dollar.

Australia, as a prominent exporter of commodities like iron ore, coal, and gold, renders the AUD/USD pair particularly sensitive to fluctuations in commodity prices.

Other things like the differences in interest rates, how global trade is swinging, and how brave or cautious the market feels about taking risks also shape how the pair moves.

USD/CAD: The Oil and Loonie Affair

The USD/CAD pair shows how the US and Canadian dollar, sometimes called the “loonie,” interact. Because Canada’s a big player in commodities, prices often ruffle this pair’s feathers.

Numbers and information about the economies of both countries, especially anything tied to the energy industry, can have a real say in which way this pair swings.

Interest rate disparities, trade dynamics, and market sentiment toward risk similarly contribute to the USD/CAD pair’s trend.

Exotic Currency Pairs

USD/MXN: The Mexican Peso Perspective

The USD/MXN pair delineates the relationship between the US dollar and the Mexican peso. The economic data from Mexico and the US, the political developments in both nations, and market sentiment toward emerging market currencies all impact how this pair moves.

USD/ZAR: The South African Rand Realm

The USD/ZAR pair represents the relationship between the US dollar and the South African rand. The way this pair behaves is affected by economic information from South Africa and the US, political events happening in both places and the prices of stuff like gold and platinum.

The USD/ZAR pair can show noticeable trends, especially when the world’s economy is shaky.

USD/TRY: The Turkish Lira Tale

The USD/TRY pair portrays the correlation between the US dollar and the Turkish lira. The direction of this pair is influenced by things like economic information from Turkey and the United States, political changes in both places and how people in the market feel about emerging market currencies.

The USD/TRY pair can get a bit bumpy at times, but it also offers chances for trades on the move.

USD/SGD: The Singaporean Dollar Saga

The USD/SGD pair reflects the relationship between the US dollar and the Singapore dollar. The direction of this pair is shaped by things like economic statistics from Singapore and the US and choices made by the Monetary Authority of Singapore on monetary policies and how folks feel about Asian currencies in the market. When the world’s economy gets shaky, the USD/SGD pair sometimes likes to strut its trending stuff.

USD/SEK: The Swedish Krona Chronicle

The USD/SEK pair shows the relationship between the US dollar and the Swedish krona. The direction of this pair is shaped by things like economic information from Sweden and the US, choices on monetary policies made by the Riksbank, and how people generally feel about currencies in Scandinavia.

So, the USD/SEK pair can sometimes provide chances for trends to develop, especially when times are uncertain due to economic or political reasons.

EUR/GBP: The Brexit Battleground

The EUR/GBP pair reflects the link between the euro and the British pound sterling.

The path of this pair is shaped by the constant back-and-forth of economic information from both the Eurozone and the UK, tangled up with all the complex political events tied to Brexit.

The EUR/GBP pair can experience significant trends during periods of uncertainty surrounding the UK’s relationship with the European Union.

EUR/JPY: The Euro-Yen Crossroads

The EUR/JPY pair portrays the relationship between the euro and the Japanese yen. The way this pair moves is affected by economic information from the Eurozone and Japan and how people in the market feel about taking risks

The EUR/JPY pair can exhibit trending behavior, especially during periods marked by economic and financial market volatility.

GBP/JPY: The Geopolitical Barometer

This pair’s direction is swayed by economic updates from both the UK and Japan, alongside global events that have a political impact and how cautious or adventurous traders feel.

AUD/NZD: The Trans-Tasman Link

The AUD/NZD pair tells us about the connection between the Australian and New Zealand dollar.

Economic data from Australia and New Zealand, commodities, and risks in the market impact this pair movement.

• Q:

  Why are currency pairs important in forex trading?
  A: Trending currency pairs are the dynamic leaders of the forex market, and they matter greatly because they provide traders with profitable chances amid the ups and downs of prices.
• Q:

  Could you tell us about the most prominent trending currency pairs in forex?
  A: They are EUR/USD, USD/JPY, GBP/USD, USD/CHF, and AUD/USD, and they are the leaders in forex trading.
• Q:

  Do lesser-known pairs also exhibit effective trends?
  A: Absolutely, pairs like USD/MXN, USD/ZAR, USD/TRY, USD/SGD, and USD/SEK might not be as famous. Still, they pack significant trending potential, driven by factors like economic data, political developments, and market sentiment.

by JustMarkets, 28.11.2023