- Foreign exchange rates are quoted in pairs
- Major Pairs reference major currencies coupled with the USD
- Cross Pairs reference major currencies coupled with a non USD currency
Foreign exchange rates are quoted using two currencies, which then are combined to create a currency pair. The majority of these pairs are created using the G-8 currencies listed below which are then divided into two classifications, Major Pairs and Cross Pairs.
Today we will continue our review by briefly explaining exactly is meant by a currency cross.
Currency Cross Pairs
“Major Pairs” are considered when any of the Major G8 currencies are coupled with the USD, such as the EURUSD. A cross pair is one that does not include the USD. These currency cross pairs were created to ease the process in which traders could exchange money. Not only were transactions simplified without first having to convert to USD as a common medium, but now traders can also trade while avoiding USD volatility.
The other major benefit to trading cross pairs is for their strong trending markets. One example of a currency cross pair is the EURAUD. For the 2013 trading year the EURAUD moved a total of 3378 pips from low to high. This is nearly 4x the movement of the EURUSD! The EURUSD major only managed a move 848 pips, measured from low to high for the 2013 trading year. Other cross pairs for the Euro includes the EURGBP, EURAUD and EURJPY to name a few.So remember next time you open your platform there are opportunities outside of the majors, and look for the currency crosses.