The essential regularly traded currency pair is the euro/U.S. dollar. The euro is the base currency within the pairing, even though the dollar could be the quote currency. It shows how much regarding the quote currency is needed to get one unit of the base, or how many U.S. dollars are required to purchase 1 euro.
This pairing has a tendency to have a negative correlation utilizing the U.S. dollar/Swiss franc pairing, meaning as one moves up, the other moves in the other direction. It also has a positive correlation – meaning both currencies will move around in the same direction – because of the British pound/U.S. dollar. The euro, pound and franc have a confident correlation with one another.
The U.S. dollar/Japanese Yen could be the next most traded pair, and it is called trading the gopher. It has a tendency to correlate positively because of the U.S. dollar/Swiss Franc and U.S. dollar/Canadian dollar pairs considering that the U.S. dollar is the base currency in each.
Trading the British pound/U.S. dollar pairing is called trading the cable. It usually has a bad correlation using the U.S. dollar/Swiss Franc pairing, but a positive correlation because of the euro/U.S. dollar.
The U.S. dollar/Canadian dollar currency pair correlates negatively utilizing the Australian dollar/U.S. dollar, the British pound/U.S. dollar, and also the euro/U.S. dollar due to the fact U.S. dollar may be the base currency with its pairing because of the Canadian dollar.
The U.S. dollar/Swiss franc usually has a bad correlation using the euro/U.S. dollar and British pound/U.S. dollar. Forex traders have traditionally considered the franc to be a safe haven during times of political unrest.
And also the Australian dollar/U.S. dollar pair has a tendency to have an adverse correlation with any pairing that doesn’t make use of the U.S. dollar as the quote currency.