Forex Basics: Introduction to the FX Majors

Good morning traders, if you're getting started trading the global financial markets, one of the key challenges is when you're trying to move quickly to navigate around your broker trading platform such as the ACY securities Metatrader 4 system understanding from the news and from commentary from key analysts like myself, what pair we're talking about and how to find it quickly. So let's start with something very useful and that's understanding what are the major FX pairs, what are the cross pairs that matter in Forex trading? What are the commodities that are commonly the big movers and present a lot of trading opportunities. We'll talk a few abbreviations that you need to know as well. So let's start with those FX majors. What are the FX majors in order we have the Euro Dollar? The Euro Dollar is the most heavily traded instrument in the world.

Now, Euro Dollar quoted as EURUSD, often called Euro Dollar is a very big proxy for the risk trade, but we won't go too deeply into how it moves and what changes the price level of Euro Dollar. Just firstly understand that it's at the pointy end of your FX majors. The next one is a hot one. It's the cable or the GBP, the Great Britain Pound versus that US Dollar. Bear in mind, a couple of key abbreviations here. Firstly, the US Dollar can be called the greenback because of the bills being green and the Sterling against the US Dollar can often be called cable because in the old days, cable messages were sent from London to New York. That's how GBP was traded against the USD, so that is firmly number two. Number three is Dollar Yen. Pretty self-explanatory, it's the US Dollar versus the Japanese Yen. The Japanese yen is a monster.

It is a very heavily traded pair and a very popular pair amongst FX day traders as well because it moves in decent trading Rangers. More often than not. Pairing it up with the US Dollar makes it a very heavily traded FX major Dollar Yen. The Swissy or what's known as the Swissy is the US Dollar versus the Swiss Frank. How to find that one. It's USD. CHF. Swiss Franc being CHF, of course. Now when we talk about Swiss Franc and the US Dollar pairing, Dollar Swiss known as Swissy, this is often a trade played out when there is some risk on risk off bias in the market because the Yen and the Swiss Franc are very big safe Haven currencies, so just wanted to tick that off at the same time that the Swissy, the Swiss Franc and that Japanese Yen, a very big safe haven assets. Those are your big for the Dollar CAD though is up next Dollar CAD is the US Dollar versus the Canadian Dollar or the CAD.

Okay. It is often known as the looney based on the coin being a loon, so Dollar CAD or the looney is another interesting pair where you've got the US Dollar measured up against one of the commodity currencies. The other two really big commodity currencies are the Aussie Dollar in the Kiwi Dollar. So firstly, let's look at Aussie US the Aussie versus the US or the AUD against the USD is often called the Aussie for obvious reasons because so many key pairs have dollar at the end such as the Aussie, the Kiwi in the CAD. That's why there are abbreviated to the Aussie so we know which dollar we're talking about. Our local currency here in Australia, the AUDUSD is known as the Aussie. The Kiwi has the exact same principle, so the Kiwi is the New Zealand Dollar versus the USD.

So the Kiwi often known as the bird. Okay. The bird is the Kiwi dollar and the Kiwi is a very, very much a major FX pair as well. Those are the big ones. Eurodollar the cable or the GBPUSD. The USD Swiss, the USD Yen, the Aussie, the Kiwi and Dollar CAD. Now that covers off Forex majors. What across pairs? What on earth does it mean to say I'm trading cross pairs. Something like the Aussie Yen. So two major currencies, but the US Dollars not involved. So it's known as across pair when you're pairing up something like the risk asset, Aussie Dollar and the Japanese Yen. So if something changes in the market to affect the risk sentiment in a significant way and a reset therefore should be coming on the charts, that's when often I'll reach for the Aussie Yen as a nice proxy for risk versus safe, risk asset risk currency versus safe haven of the Yen.

So Aussie Yen is a great example. Kiwi Yen is in the same boat. So if we get a big jolt, something that's really good in the market, such as a breakthrough on the trade talks between the US and China, that's where your Kiwi Yen as a cross pair comes into play. And that's a pair that I'll often be talking about as an analyst. And more importantly, looking at grab and trade as a day trader. So the Kiwi Yen is another good risk proxy way to play up your cross pairs. Now the actual pair, the actual FX pair known as the cross is Euro Pound. For example, earlier today I had a trade on Euro Pound playing the IFO German data that's coming out in today's European session up against the Sterling or GBP based on the fact that we still have some uncertainty rolling through around the UK election.

So when someone says I'm trading the cross or I'm looking at the cross, literally the cross, they mean Euro Pound. There's a lot of cross pairs. We'll be here all day if we go through all of them because you can match any FX pair with another one. That's just the nature of Forex, but let's sidestep into key commodity markets. There's two big ones. Firstly, gold. Gold is quoted based on XAUUSD. What does that mean? Will I use a chemical symbol for gold? So XAU and then it's denominated in US Dollars when you're trading futures contract, that's why XAUUSD is gold. Very simple. It is quoted as one number and depending on what broker you trade with, depends on the exact spread that you pay in gold. But we'll come back later and explain more about spreads. In terms of oil. The main oil contract that we like to talk about and more importantly, trade is West Texas Intermediate, known as WTI. So when I say oil, that's the contract I'm referring to. WTI, West Texas Intermediate, and it's traded in US Dollars as well. So sometimes when the US dollar has a big reset, it can impact on the price of oil and your WTI price can move because the US Dollar denomination has an input as well. Those are your big Forex majors, an introduction to ethics cross pairs, and also opening up that door to which pair we mean when we're talking commodities such as golden oil.