When investing in the Forex market, it’s important to know which currencies to focus on. You need to spend your time and energy on the largest and most liquid Forex currency pairs to be sure you can take advantage of the trading opportunities offered by large price movements.
The 2016 Triennial Central Bank Survey from the Bank for International Settlements states that the most important currencies in terms of volume are the USD, the EUR, the JPY and the GBP.
In the current geopolitical climate, the following currency pairs are showing interesting price movements that could lead to significant gains from timely trades.
The trade dispute between the U.S. and China has resulted in new American tariffs that will soon be implemented on Chinese products, and the Australian currency has been negatively impacted. Since mid-April, the AUD/USD currency pair has been falling strongly, evolving in a bearish configuration.
As one of China’s main trade partners, Australia provides it with many commodities. As such, the country is highly sensitive to Chinese growth, which influences the quantity of Australian raw materials required. The Reserve Bank of Australia has been monitoring data this month to decide whether or not to cut its benchmark interest rate in June or August, which should also impact the value of the AUD.
When it comes to Brexit, the currency pair most impacted is certainly the GBP/EUR, as Europe is an important trade partner for the United Kingdom. After the announcement of Theresa May’s resignation and the rapid rise of Nigel Farage’s Brexit Party, the GBP is under increased pressure.
Any news that reduces uncertainty regarding Brexit and increase the likelihood of an eventual deal with the EU will support confidence in Sterling, and could be positive for the currency pair, which has been losing ground since the beginning of the month.
The Japanese yen is one of the most sought-after currencies in times of higher market volatility and uncertainty. The JPY/USD is often considered the most important safe-haven financial asset when it comes to the Forex market.
With rising uncertainty about the outcomes of Sino-American trade talks and the Brexit process, many market participants are preferring to invest parts of their portfolios in less risky assets, supporting the price of the JPY/USD. Technically, this currency pair has been rising since April 25th and is currently evolving in a reversal bullish configuration.
Trading the Forex market in May
As a Forex trader, always remember to monitor the economic calendar and to follow the news, especially updates regarding the U.S.-China trade relationship, as well as any fresh twists in the Brexit saga.