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Looking for a wonderful opportunity to grow your capital? Forex trading is one such amazing option. Having said that, it works best only if you pick your battles (and currency pairs) wisely. In this blog post, we’ll check in detail which currency pairs tend to perform best, particularly for Indian traders. We’ll cover why some pairs are globally popular, which pairs are common in India, and how to match pairs with different trading goals.
Why the choice of currency pairs matters
Ever wondered why each currency pair behaves differently? Each currency pair reflects the economic balance between two countries or regions. Due to this reason they behave differently. . Factors such as interest rates, trade balances, economic data, geopolitical events, and global risk sentiment influence how much one currency moves relative to another.
As a beginner who is trading forex, picking the right currency pair is quite important. The pair you choose affects liquidity, volatility, cost (spreads), and the ease of finding out reliable data and technical patterns. Thus why many experienced traders focus on a few top pairs, instead of spreading themselves thin across dozens of currencies.
Hence, understanding and selecting the best forex currency pairs based on your situation can make a major impact on both profit potential and risk management.
Global “major” currency pairs: what makes them popular
1: What is a stock?
In the global forex market, certain currency pairs are traded much more than others. These “major” pairs are generally more liquid, have tighter bid-ask spreads, and respond predictably (relative to risk) making them comfortable for many traders.
What are major pairs?
Are you curious to know about major currency pairs? They typically involve the U.S. dollar (USD) as one half of the pair, paired with another major economy’s currency. USD is included as it is the world’s primary reserve currency. Moreover, USD also features in the majority of global FX transactions.
Here’s the list of some of the most traded major pairs globally:
- EUR/USD (Euro / U.S. Dollar)
- USD/JPY (U.S. Dollar / Japanese Yen)
- GBP/USD (British Pound / U.S. Dollar)
- USD/CHF (U.S. Dollar / Swiss Franc)
- AUD/USD (Australian Dollar / U.S. Dollar)
- USD/CAD (U.S. Dollar / Canadian Dollar)
- NZD/USD (New Zealand Dollar / U.S. Dollar)
Let’s look at why some of these stand out.
EUR/USD
- This is the most traded currency pair in the world.
- Because of its high volume and liquidity, EUR/USD tends to have tighter spreads — which lowers transaction cost and reduces slippage.
- The economies behind EUR and USD are huge and relatively stable, which often makes price moves more predictable compared to riskier or exotic pairs.
USD/JPY
- Another very popular pair, known for good liquidity and generally lower spreads.
- The Japanese Yen (JPY) often acts as a “safe-haven” currency during global uncertainty, which can make USD/JPY attractive for more risk-aware traders.
- Because of its lower volatility relative to many other pairs, it can suit traders seeking stability.
GBP/USD
- Popularly known as “Cable,” this pair has become popular as it tends to offer higher volatility than EUR/USD or USD/JPY.
- When there is higher volatility, there may be bigger price swings as well which can be good for short-term traders or scalpers looking for profit opportunities.
- The problem with higher volatility is higher risk, so it is quite important to have a robust strategy and risk management.
AUD/USD, USD/CAD, NZD/USD
- Also known by the names “commodity” or “commodity-linked” pairs due to the reason that their value can be influenced by commodity exports from Australia, Canada, or New Zealand.
- For example, AUD/USD tends to react to commodity prices such as metals and minerals; USD/CAD often correlates with oil prices due to Canada’s oil exports.
- For traders who monitor global commodity markets or macroeconomic data, these pairs can offer opportunities not limited to global interest rate moves or economic news.
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Favourite currency pairs for Indian traders
While global forex traders often use the major pairs listed above, Indian traders have additional considerations, particularly regulatory constraints and the prevalence of INR-based pairs.
INR-based pairs: The default choice for many Indian traders
For retail traders in India, INR-based pairs are often the main (or only) accessible option — especially when trading through regulated exchanges.
Here’s the list of some of the favorite INR-based pairs preferred by Indian traders:
- USD/INR (U.S. Dollar / Indian Rupee) – Generally regarded as the most traded pair in India.
- EUR/INR (Euro / Indian Rupee) – useful for those looking for exposure to European economic developments and euro-rupee exchange movements.
- GBP/INR (British Pound / Indian Rupee) – popular among those who follow British economic news or have exposure to GBP through trade.
- JPY/INR (Japanese Yen / Indian Rupee) – This pair is a preferred choice of some traders, especially if they track Japan-India trade or global risk sentiment influencing JPY.
These pairs are denominated in INR and due to this reason they allow Indian traders to get rid of complexities related to currency-conversion and, depending on the platform, comply more easily with domestic regulatory frameworks.
But many still look at global majors
Though there are regulatory and accessibility constraints, many Indian forex traders, especially those using international brokers, or trading derivatives, still monitor global major pairs like EUR/USD, USD/JPY, GBP/USD, and AUD/USD. The reason is that these pairs are highly liquid, offer tighter spreads, and tend to have more reliable technical behaviour. These are the factors that make it appealing to both beginners and advanced traders.
Thus, for Indian forex traders who have access, the best forex currency pairs often involve a mix of some INR-based pairs for domestic exposure and some global majors for more diversified global-market strategies.
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5 tips to choose the right pair for your strategy
Not every pair fits every trader. Choose your “best pair” based on your goals, risk appetite, time horizon, and trading style (scalping, swing trading, hedging, etc.). Here are some tips that help you make that crucial decision :
1. Be clear about your objective
- Long-term hedging or exposure to global economics → INR-based pairs such as USD/INR, EUR/INR, etc. or global majors would be the best choice if you believe global macroeconomic trends matter.
- Short-term trading / intraday / swing trading → Global majors such as EUR/USD, GBP/USD, USD/JPY work best as they offer high liquidity and tighter spreads.
- Commodity or macro-linked trades → Commodity-linked pairs such as AUD/USD or USD/CAD would be a good option if you follow commodity trends like oil, metals etc. that can make an impact on these currencies.
2. Consider liquidity and spreads
High liquidity comes with easier trades and tighter spreads, thus bringing down cost. Due to this reason global majors like EUR/USD or USD/JPY are generally suggested for beginners and frequent traders.
For Indian traders, INR-pairs are often more liquid in domestic markets due to the consistent demand for USD/INR, EUR/INR, etc.
3. Volatility vs stability – match with risk appetite
- If you are looking for stability and want to stay away from sudden swings, pairs like EUR/USD or USD/JPY tend to be more stable when compared to highly volatile pairs.
- If you are least bothered about risk and want to make bigger moves for making potential larger profits, pairs like GBP/USD or commodity-linked AUD/USD would be a good choice as they may offer more volatility.
4. Keep an eye on global news and economic data
If you are interested in global majors, economic news from the U.S., Eurozone, UK, Japan, Australia, etc., moves the markets. When it comes to INR-based pairs, domestic factors such as Indian trade data, rupee demand/supply, RBI policies, global capital flows etc also play a big role. The advantage of regularly monitoring such factors is that it becomes easy to make informed decisions.
5. Regulatory and compliance considerations
Are you someone trading from India? If the answer is ‘yes’, it’s important to know which currency pairs are legally permitted by domestic exchanges and regulators. Many regulated exchanges restrict retail trading to only INR-based pairs.
If you prefer to trade global majors via overseas brokers or less regulated platforms, keep yourself updated about compliance, tax, and regulatory implications.
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Know moreRisks and considerations when trading forex in India
Trading forex, especially with pairs that do not involve INR carries certain risks for Indian traders beyond the usual market risks. Some of these include:
- Regulatory restrictions: As mentioned, many cross-currency pairs may not be available legally for retail Indian traders.
- Rupee volatility: If you are going for INR-based pairs, keep in mind that factors like trade balance, foreign capital flows, domestic inflation, and central-bank policy can cause sudden moves.
- Global macro risk: Remember that in the case of global majors, global geopolitical events, interest-rate decisions by central banks, commodity price swings, etc., can cause volatility.
- Liquidity risk in exotic or less common pairs: If you prefer to trade less common or exotic pairs, there may be wide spreads, slippage, or lack of reliable data, making risk management tougher.
After considering all these risks, it’s prudent for Indian traders to continue trading on a few well-understood pairs rather than chasing every possible opportunity.
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Key takeaways
- The currency pair you choose has a big impact on liquidity, spreads, volatility, and overall risk.
- In the case of global “major” currency pairs, especially the ones where USD is involved are often regarded as the best forex currency pairs due to high liquidity, tight spreads, and predictable behavior.
- Indian traders most often use INR-based pairs such as USD/INR, EUR/INR, GBP/INR, JPY/INR partly because of regulatory and accessibility considerations.
- Choose the “right” pair depending on your trading goals, risk appetite, market understanding, and strategy.
- Ensure that you are always aware of regulatory restrictions and global/domestic macro-economic factors that can affect currency markets.
Conclusion
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Know moreFrequently Asked Questions
What Makes the EUR/USD the "Fiber"?
Many people believe it to be a modern update on the moniker “Cable” given to the GBP/USD in reference to the steel cables that were strung across the ocean’s bottom in the 19th century to help communications between the United States and Great Britain. In other words, fiber optics would be used in place of wires today.
Why Is the EUR/USD Currency Pair the Most Popular?
The currency that is traded the most globally is the American dollar. Also heavily traded is the euro. The perceived stability and strength of their economies and political situations is the cause of this. The currency pair is therefore the best suitable for trading.
Why Does the USD Appear in So Many of the Top Currency Pairs?
Due to the robustness of the economy and the authority and stability of the US government, such partnerships take place.
What are the “major” currency pairs in forex trading?
Major currency pairs are those that pair the U.S. dollar (USD) with another major global currency (like EUR, JPY, GBP, AUD, etc.). They are the most traded pairs globally, offering high liquidity, tight spreads, and fairly predictable behavior.
Why is EUR/USD often considered the best forex currency pair?
EUR/USD is the most traded pair globally. Because of its high trading volume and liquidity, it typically has tight bid-ask spreads, lower transaction costs, and often more stability compared to more volatile or exotic pairs.
Are INR-based pairs a good choice for Indian traders?
Yes. Pairs like USD/INR, EUR/INR, GBP/INR, and JPY/INR are commonly traded by Indian retail traders as they are often more accessible legally and align with domestic trading regulations.
Should I always trade major pairs, or sometimes choose commodity-linked pairs like AUD/USD?
Take that decision based on your strategy. Major pairs often offer stability and tighter spreads, which would be apt for beginners or traders who prefer lower risk. Commodity-linked pairs (like AUD/USD or USD/CAD) tend to be more volatile and can offer higher potential profits, but it comes with higher risk.
