Currency Pair Personalities

Each currency pair exhibits a unique behavior, just like a human, it collectively represents the economy of a country. To have better trade performances, take time to understand and read their peculiar personalities. We can categorize personalities of currency pairs by: best trading time, factors affecting pairs, volume, range, momentum etc. You will have a more vivid understanding of these when you gain more experience in the market.

EUR/USD: Most traded currency pair on the Forex market, with approximately 28% of total daily volume. This is one of the recommended currency pairs for beginners to start trading. Of course, to trade this pair, you are ought to follow Euro time zone, ie. 0700 GMT – 1700 GMT or Malaysia Time: 3 pm – 1 am. (Take note of their 2-hour lunch break too, which is around 6pm – 8 pm Malaysia Time). Factors which are affecting the EUR/USD rate are:-

1. The interest rate differential between the European Bank (ECB) and the Federal Reserve (FED)
2. Dollar strength drives EUR/USD lower
3. FED intervention to weaken the dollar that sends EUR/USD higher

Refer: Forex Economic Calendar to know when you should be cautious for big movements!

In other words, focus on European economy and US economy only when you are trading this pair. Like see-saw game, Euro strength will push EUR/USD higher while Dollar strength pulls it lower. What if both of the currencies are going same directions (strong together or weak together)? Then you need to have other supporting pairs to determine which one is stronger and dominant in the overall EUR/USD pair direction.

Refer: Supporting Currency Pairs (coming soon)

USD/JPY: This currency pair is rather mild in fluctuations, as compared to other ones. The best time to trade USD/JPY is 2400 GMT – 0900 GMT (or Malaysia Time 8am – 5pm). Note that Japan is one hour ahead of Malaysia time, so be ready at your monitor at least 1 hour before and analyze before placing your order. Factors influencing USD/JPY are:-

1. The interest rate differential between the Bank of Japan (BoJ)
2. Japanese government intervention to strengthen their currency sends USD/JPY lower

Refer: Forex Economic Calendar to know when you should be cautious for big movements!

Japanese Yen serves as an alternative to hedge against US Dollar (other instruments like Gold and commodities serve the same function as well). Hence, investors tend to buy more JPY when USD doesn’t perform well, similarly, investors will switch their funds back to buy greenbacks when US economy is recovering.

GBP/USD: Pretty much similar to EUR/USD pair, in terms of time zone, behavior, movements etc. You may consider entering into this market when there is nothing much in EUR/USD side. Best time to trade this pair is exactly the same with EUR/USD, which you also follow Euro time zone, ie. 0700 GMT – 1700 GMT or Malaysia Time: 3 pm – 1 am. Factors causing movements in GBP/USD are:

1. The interest rate differential between the Bank of England (BoE) and the Federal Reserve
2. High yield and attractive growth in the UK drives GBP/USD higher.

Refer: Forex Economic Calendar to know when you should be cautious for big movements!