NOTICIAS FOREX

  ●  December NFPs later today   ●  Big movements in precious metals   ●  Crude oil pushed higher PMs brace for commodity index rebalancing Starting later today, Bloomberg and Standard & Poor’s will begin the annual process of rebalancing their respective commodity indices. Such readjustments are a routine occurrence, but are likely to be more significant this year, reflecting the extreme price increases seen in precious metals in 2025. The new weightings for gold, silver, crude oil and other commodities will be adjusted in accordance with predetermined rules, potentially forcing larger institutional players into submitting sizeable trading orders over the next few days. The selloff in silver over the last couple of days is likely a pre-emptive defensive move ahead of such adjustments, which will last until mid-January. From highs of $82 per ounce just two days ago, silver explored lows of $73 yesterday before closing higher. The white metal appears equally indecisive today, as do precious metals in general, with the exception of gold, which is displaying admirable stability around $4,460 per ounce. NFP later today US stocks are patiently awaiting non-farm payrolls later today, which represents the last piece of the puzzle with regard to last year’s labour market. Wednesday’s ADP print came in close to expectations, provoking little reaction from financial markets, but today’s NFP drop could well swerve clear of analysts’ predictions. Another potential bump in the road is the Supreme Court’s decision on the legal status of the recent tariff measures imposed on the United States’ trading partners. The court is set to deliver its verdict later today, and while it does not have the ultimate say on the matter, the resulting legal wrangling could confuse and delay the implementation of import duties for months to come. Events push crude oil higher A combination of different events pushed crude oil prices higher yesterday, lifting the Brent Crude index over $62 a barrel and WTI up to $58. The US seized a number of Venezuelan tankers on Wednesday, as part of the effort to contain oil exports from the South American nation. In the Middle East, the Iraqi government recently approved plans to nationalise the West Qurna 2 oil field – one of the largest oil fields in the region. Meanwhile, across the border, sweeping protests in Iran have oil markets on edge because of Trump’s promise to intervene on behalf of peaceful protestors. Nothing concrete as of yet, but a direct intervention by the US military will obviously have far-reaching consequences for oil delivery in the region. #NFP #Metals #CrudeOil

Liquidity describes how easily an asset can be bought or sold without causing a significant change in its price. In simple terms, it refers to how many buyers and sellers are active in the market at any given moment and how smoothly trades can be executed. This matters because the forex market is the most liquid financial market in the world, with more than USD 7.5 trillion traded daily in over-the-counter transactions. However, liquidity is not evenly distributed. Some currency pairs trade with deep liquidity and tight spreads, while others experience thinner conditions that can make trading more difficult and costly. Many traders notice that spreads widen, execution feels slower, or price suddenly jumps at certain times of day. The key reason is liquidity. Liquidity levels vary by currency pair, trading session, and market conditions, and these changes directly affect execution quality, price stability, and trading costs. For this reason, understanding how liquidity works in forex, and how it can be measured, helps traders better interpret market behaviour and adapt their trading approach to changing conditions. What Is Liquidity in Forex? Liquidity in forex refers to how easily a currency pair can be bought or sold without causing a noticeable change in price. In forex trading, liquidity means there is a sufficient number of buyers and sellers willing to trade at or near the current market price. The core principle is simple: the more active participants there are in a currency pair, the more liquid that market becomes. High liquidity allows trades to be executed quickly and efficiently, while low liquidity can result in slower execution, wider spreads, and unexpected price moves. In practice, liquidity is closely linked to the popularity of a currency pair and the time of day it is traded. Major pairs such as EUR/USD tend to be highly liquid because they attract consistent interest from banks, institutions, and retail traders around the world. As a result, these pairs generally offer smoother trading conditions and lower transaction costs. This is why liquidity is not just a market concept, but a key factor that directly shapes how traders experience the forex market on a day-to-day basis. Read more:What Is Forex? 7 Steps to Learn How It Works & Start Trading Types of Liquidity in Forex High Liquidity High liquidity in the forex market means there is a large number of buyers and sellers actively trading a currency pair at any given time. To put it simply, trades can be executed quickly, in size, and without causing significant price movement. The key reason high liquidity matters is because of equality. When liquidity is strong, orders are filled faster, spreads are tighter, and prices tend to move in a more orderly and predictable way. This is why most professional traders prefer operating in highly liquid markets. In practice, high liquidity is most commonly found in major currency pairs, especially during active trading sessions such as the London and New York overlap. These pairs attract constant interest from banks, hedge funds, corporations, and retail traders, which keeps trading volume high throughout the day. Examples of typically high-liquidity forex pairs include: EUR/USD – The most traded currency pair globally, known for deep liquidity and consistently tight spreads USD/JPY – Highly liquid due to strong participation from Asian and US institutions GBP/USD – Very active during London and New York hours, often combining liquidity with volatility USD/CHF – A major pair with safe-haven characteristics and steady institutional flow AUD/USD – Popular during the Asian session and influenced by commodity demand USD/CAD – Closely linked to oil prices and North American trading activity NZD/USD – Liquid, though slightly thinner than AUD/USD, particularly outside Asian hours Advantages of high liquidity: Faster trade execution Narrower bid–ask spreads Lower slippage risk More reliable technical price levels Disadvantages of high liquidity: Smaller average price moves Fewer extreme volatility opportunities As a result, high-liquidity markets are generally best suited to scalpers, day traders, and anyone who values consistent execution and lower trading costs. Low Liquidity Low liquidity in the forex market occurs when there are fewer buyers and sellers active at the same time. Put into simple terms, this means trades are harder to match, and prices can move more sharply in response to relatively small orders. The key issue with low liquidity is uncertainty. When trading activity drops, execution becomes less predictable, spreads widen, and price can jump between levels rather than move smoothly. This is why low-liquidity conditions often feel more volatile, even if overall market volume is low. In practice, low liquidity is most commonly seen in exotic or less frequently traded currency pairs, as well as during off-peak trading hours such as late New York or rollover periods. During these times, fewer institutional participants are active, which reduces market depth. Examples of typically low-liquidity forex pairs include: USD/TRY – Sensitive to regional risk and policy changes USD/ZAR – Prone to sharp moves during risk-off periods EUR/SEK – Lower participation outside European hours USD/MXN – Can be liquid at times but thins quickly outside US hours Advantages of low liquidity: Potential for larger price movements Short-term trading opportunities for experienced traders Disadvantages of low liquidity: Wider bid–ask spreads Higher slippage risk Slower or partial execution Less reliable technical levels For this reason, low-liquidity markets are generally more suitable for experienced traders who understand the risks and adjust position sizing accordingly. Read more:What is a currency pair? Definition, types, and examples High Liquidity vs Low Liquidity in Forex (Comparison Table) The difference between high and low liquidity comes down to how active the market is and how easily trades can be absorbed. The next table highlights how liquidity levels affect key aspects of the forex trading environment. Category High Liquidity Low Liquidity Market characteristics Deep, active, and efficient markets Thin, fragmented trading Market participants Banks, institutions, funds, retail traders Fewer active participants Trading volume Very high and consistent Low or sporadic Execution speed Fast and reliable Slower and less predictable Trading conditions Stable, orderly price action Erratic and jumpy price action Advantages Tight spreads, low slippage, smooth execution Larger potential price moves Disadvantages Smaller average price ranges High costs and execution risk Currency pair examples EUR/USD, USD/JPY, GBP/USD Exotic and minor pairs Overall market environment Transparent and efficient Unpredictable and risk-prone As a result, traders operating in high-liquidity environments generally experience lower costs and more consistent execution, while low-liquidity markets demand stricter risk management and greater experience. Read more:Forex risk management: 10 tips to manage 6 key risk types in trading Why Liquidity in Forex Matters？ Liquidity plays a central role in how the forex market functions and how traders experience it on a practical level. Put simply, liquidity determines how easily trades can be entered and exited, how stable prices are, and how much trading ultimately costs. This matters because liquidity influences the overall market environment. High-liquidity conditions tend to create smoother price action, faster execution, and tighter spreads, while low-liquidity conditions can lead to erratic price movements, wider spreads, and execution uncertainty. As a result, the same trading strategy can perform very differently depending on liquidity. Liquidity also affects trader behaviour. When liquidity is strong, traders are generally more willing to participate, which reinforces market depth and stability. When liquidity weakens, participation often declines, increasing risk and reducing market efficiency. For this reason, understanding why liquidity matters is essential before exploring how it impacts specific areas such as trade execution, price stability, trading costs, and position risk, which are covered in the following sections. Trade Execution Liquidity has a direct impact on how quickly and accurately trades are executed in the forex market. In simple terms, higher liquidity means there are more orders available at nearby prices, making it easier for trades to be filled instantly. When liquidity is high: Orders are filled quickly Slippage is minimal Execution prices closely match expected prices When liquidity is low: Orders may be delayed or partially filled Slippage becomes more likely Execution prices can differ significantly from quoted prices Here’s how it works: when a trade is placed, the market needs enough opposing orders to absorb it. If liquidity is thin, the price must move further to find those orders, increasing execution risk. As a result, liquidity plays a critical role at the exact moment a trade is entered or exited. For this reason, traders often experience execution issues during low-liquidity periods, which is why understanding liquidity conditions is essential before placing trades, especially around volatile market events. Read more:What is slippage and how to avoid it in trading Price Stability Liquidity has a strong influence on price stability in the forex market. In simple terms, liquidity determines how easily the market can absorb buying and selling pressure without causing sharp or erratic price movements. When liquidity is high, price changes tend to be smoother and more orderly. Large trades can be executed with minimal impact, which helps prices respect technical levels such as support and resistance. This is why price action often looks cleaner during active trading sessions. In low-liquidity conditions, even relatively small orders can push prices significantly. This can result in sudden spikes, false breakouts, and increased short-term volatility. As a result, price behaviour becomes less predictable and more difficult to trade consistently. For this reason, traders often associate stable price action with high-liquidity environments and treat low-liquidity periods with greater caution. Trading Costs Liquidity plays a major role in determining how much it costs to trade forex. The key reason is that liquidity directly affects trading frictions, especially the costs traders face when entering and exiting positions. In high-liquidity conditions, competition between buyers and sellers keeps costs low. Bid–ask spreads are typically tighter, execution is smoother, and price quotes are more consistent. This allows traders to enter and exit positions closer to their intended prices, reducing overall transaction costs. When liquidity is low, trading costs tend to rise. Spreads widen, slippage becomes more common, and execution quality can deteriorate. Even if a trade idea is correct, higher costs can significantly reduce profitability or turn a marginal trade into a losing one. This matters because the bid–ask spread is the most direct cost in forex trading, and it expands or contracts based on liquidity. For this reason, many traders closely monitor liquidity conditions to manage costs more effectively. Read more:What Is the Spread in Forex? Learn to Calculate and Trade It Position Risk Liquidity also affects risk while a trade is being held, not just at the moment of entry or exit. In simple terms, liquidity influences how easily a position can be closed without unwanted price movement. In high-liquidity environments, traders can usually exit positions quickly and close to the expected price. Price gaps are less common and stop-loss orders are more likely to be filled near their intended levels. This helps reduce uncertainty during the holding period. In low-liquidity conditions, position risk increases. Prices can jump suddenly, stops may be filled at worse levels, and gaps can occur when market participation drops sharply. As a result, holding positions in thin markets or during quiet hours can expose traders to risks that are difficult to control. For this reason, liquidity should always be considered as part of risk management, particularly when holding positions over session changes or major news events. Market Environment The market environment refers to the overall quality and behaviour of the forex market at a given time. In simple terms, it describes whether prices are forming in an orderly, efficient manner or in a more chaotic and unpredictable way. Liquidity plays a key role in shaping this environment. When liquidity is high, pricing tends to be more transparent, spreads remain tight, and price movements reflect genuine supply and demand. This creates a healthier market where technical and fundamental analysis are more reliable. When liquidity is low, overall market quality can deteriorate. Prices may react sharply to small orders, spreads widen, and sudden spikes or gaps become more common. As a result, the market environment feels less stable and more difficult to trade consistently. For this reason, traders often assess liquidity first to understand whether current market conditions are favourable or whether caution is required. How Liquidity Affects Forex Trading (Impact Summary Table) Let’s make things easy; liquidity influences every practical aspect of trading, from execution quality to risk exposure. The table below summarises how high and low liquidity conditions affect key elements of the forex trading experience. Aspect High Liquidity Low Liquidity Trade Execution Fast, reliable fills with minimal slippage Slower fills, higher chance of slippage or partial execution Price Stability Smooth, orderly price movements Sharp moves, spikes, and false breakouts Trading Costs Tight bid–ask spreads and lower total costs Wider spreads and higher indirect costs Position Risk Easier exits, fewer gaps, more predictable stops Increased gap risk and stop-loss slippage Market Environment Efficient, transparent, and trader-friendly Unstable, unpredictable, and risk-prone As a result, traders operating in high-liquidity conditions generally benefit from better execution, lower costs, and reduced risk, while low-liquidity environments demand greater caution and stricter risk management. Factors Affecting Forex Liquidity Liquidity in the forex market is not static. It changes constantly based on a range of underlying factors that influence how willing and able market participants are to trade. In simple terms, liquidity rises when participation increases and falls when traders step back. This matters because shifts in liquidity can alter execution quality, spreads, and price behaviour, sometimes very quickly. By understanding what drives these changes, traders can better adapt their approach to different market conditions rather than being caught off guard. The key factors that influence forex liquidity include market size, monetary policy, global news and events, trading hours, and overall market sentiment. Each of these can increase or reduce participation in different ways, which is why liquidity conditions are never the same for long. For this reason, the following sections break down each factor individually to explain how and why liquidity levels rise or fall in the forex market. Market Size Market size plays a major role in determining liquidity in the forex market. In simple terms, larger markets with more participants tend to be more liquid because there is greater trading activity and stronger demand. The core principle is volume. Currency pairs that attract a high number of buyers and sellers generate larger trading volumes, which improves market depth. This depth allows trades to be absorbed across multiple price levels without causing significant price changes. In practice, this is why major currency pairs consistently offer better liquidity than minor or exotic pairs. Large global economies widely used currencies, and active institutional participation all contribute to deeper and more liquid forex markets. As a result, traders often gravitate toward larger, more established currency pairs when they want stable conditions and efficient execution. International Monetary Policies Monetary policy has a significant influence on liquidity in the forex market because it shapes expectations about interest rates, capital flows, and economic stability. In simple terms, central bank decisions affect how confident market participants feel about trading a currency. When monetary policy direction is clear and predictable, banks, institutions, and other participants are more willing to trade. This supports steady trading activity and helps maintain higher levels of liquidity. Markets tend to function more smoothly when participants broadly agree on policy expectations. In contrast, when policy uncertainty increases, such as ahead of major interest rate decisions or during shifts in central bank guidance, some traders adopt a wait-and-see approach. Trading activity may temporarily decline, which can reduce liquidity and lead to wider spreads or more erratic price behaviour. For this reason, liquidity conditions often change noticeably around central bank announcements, making monetary policy an important factor for traders to monitor. Global News and Events Global news and unexpected events can have an immediate impact on liquidity in the forex market. In simple terms, important information changes trader behaviour, which directly affects how active the market is. Ahead of major economic data releases, geopolitical developments, or unexpected headlines, some market participants reduce exposure or step aside altogether. This temporary reduction in participation can cause liquidity to fall, even if volatility increases at the same time. As a result, spreads may widen and execution quality can deteriorate just before key events. After the news is released and uncertainty begins to clear, trading activity often returns. Liquidity can recover as traders reassess the information and re-enter the market with greater confidence. For this reason, liquidity conditions around major news events often shift rapidly, making it essential for traders to be aware of the broader news backdrop before placing trades. Read more：FOREX NEWS Market Trading Hours Liquidity in the forex market varies throughout the day because different financial centres open and close at different times. In simple terms, liquidity increases when more markets are open and more participants are active simultaneously. The key reason is participation. When major trading centres such as London and New York are open at the same time, the number of buyers and sellers rises sharply. Trading activity becomes more frequent, spreads tend to tighten, and execution quality improves. This period is widely regarded as the most liquid part of the trading day. In contrast, during single-market sessions or off-hours, such as late New York or rollover, fewer participants are active. Liquidity tends to be lower, spreads can widen, and price action may become slower or more erratic. As a result, many traders plan their activity around trading sessions, favouring high-liquidity periods to benefit from better execution and lower costs. Read more：Best time to trade forex: When to enter the market during the day Liquidity by Trading Session (Overview) Rank Trading Session Time (UTC) Liquidity Characteristics NO.1 London–New York Overlap ~12:00–16:00 Highest liquidity, tight spreads, fast execution NO.2 London Session ~07:00–16:00 Strong liquidity and steady volume NO.3 New York Session ~12:00–21:00 Good liquidity, fading later in session How Liquidity Changes Throughout the Day Trading Session Main Markets Liquidity Level Description Asian Session Tokyo, Sydney Low–Moderate Range-bound, slower price action London Open Europe Rising Liquidity increases rapidly London Session Europe High Deep market participation London–New York Overlap Europe & US Very High Peak liquidity and volatility New York Session (Late) US Declining Participation gradually falls Off-hours / Roll-over Global Very Low Wide spreads, thin liquidity For this reason, understanding trading hours helps traders choose when to trade, when to reduce risk, and when to stay on the sidelines. Market Sentiment Market sentiment reflects the overall attitude of traders toward risk and opportunity in the forex market. In simple terms, it describes whether traders feel confident and willing to trade, or cautious and reluctant to participate. When market sentiment is stable or risk appetite is high, traders are generally more willing to open and hold positions. Trading activity increases, order flow improves, and liquidity tends to remain strong. This creates a supportive environment with tighter spreads and smoother price action. When uncertainty rises or sentiment turns risk-off, participation often declines. Some traders reduce position sizes or step aside entirely, which lowers trading volume and weakens liquidity. As a result, markets can become thinner and more sensitive to sudden price movements. For this reason, shifts in market sentiment often coincide with noticeable changes in liquidity, making sentiment an important backdrop for assessing current market conditions. Read more:What Is Market Sentiment? Definition, Indicators and Strategies Market Sentiment and Liquidity Relationship Market Sentiment Trading Willingness Liquidity Conditions Description Risk-on sentiment High Strong Active participation and deep liquidity Stable sentiment Moderate Balanced Normal trading conditions Rising uncertainty Lower Declining Reduced activity and cautious trading Risk-off sentiment Low Weak Thin markets and elevated risk In summary, liquidity tends to improve when traders feel confident and deteriorate when caution and uncertainty dominate. What Causes Illiquidity? Illiquidity refers to periods when it becomes difficult to buy or sell currency pairs without significantly affecting the price. In simple terms, illiquidity occurs when too few market participants are active, reducing the number of available orders. This matters because illiquid conditions can lead to poor execution, wider spreads, and sudden price jumps. Even small trades may move the market more than expected, increasing risk for traders. Illiquidity does not usually appear randomly. It is often the result of higher trading costs, increased uncertainty, or a lack of participation during specific market conditions. For this reason, understanding what causes illiquidity helps traders recognise when market conditions are deteriorating and adjust their approach accordingly. The following sections explain the two main contributors to illiquidity: direct costs and indirect costs. Direct Costs Direct costs are the visible expenses traders face when placing trades, such as bid–ask spreads and transaction fees. In simple terms, when these costs increase, trading becomes less attractive for many market participants. When direct costs rise, often during periods of low liquidity, some traders reduce their activity or step away from the market entirely. Fewer active buyers and sellers mean less competition, which can further widen spreads and deepen illiquidity. This creates a feedback loop where declining participation leads to even higher costs. In practice, direct costs tend to increase during off-peak trading hours, around major news events, or in less actively traded currency pairs. As a result, market liquidity often deteriorates as trading becomes more expensive. For this reason, monitoring direct trading costs provides valuable insight into current liquidity conditions and potential shifts in market participation. Indirect Costs Indirect costs are less visible but can be just as damaging as direct trading costs. In simple terms, these are the hidden risks that emerge when liquidity is low, even if spreads appear acceptable at first glance. When market liquidity deteriorates, traders may experience execution uncertainty, increased slippage, or reduced execution quality. Orders may be filled at worse prices than expected or stops may trigger further away from intended levels. These outcomes effectively increase the real cost of trading. As indirect costs rise, trading risk increases, and some market participants reduce activity or exit the market altogether. This further reduces participation and reinforces illiquidity. For this reason, indirect costs often play a central role in creating prolonged periods of low liquidity and unstable market conditions. How to Measure Liquidity in Forex Understanding how to measure liquidity helps traders assess current market conditions and make more informed trading decisions. In simple terms, liquidity cannot be observed directly, but it can be evaluated using several practical indicators. The key idea is to observe how actively the market is trading and how efficiently prices are formed. Factors such as volume, spreads, market depth, and price impact all provide valuable clues about liquidity conditions. By combining these measures, traders can build a clearer picture of whether the market is deep and efficient or thin and potentially risky. For this reason, the following sections explain the most commonly used methods for measuring liquidity in the forex market. Trading Volume Trading volume reflects how much market activity is taking place over a given period. In simple terms, higher trading volume usually indicates that more buyers and sellers are active, which often corresponds to stronger liquidity. Although the forex market does not have a centralised exchange, volume data provided by brokers or trading platforms can still serve as a useful reference. Rising volume typically signals increased participation, while falling volume suggests that fewer traders are involved. For example, trading volume in major currency pairs such as EUR/USD often increases during the London - New York overlap. This increase in activity is usually accompanied by tighter spreads and smoother execution, reflecting improved liquidity. As a result, monitoring volume trends can help traders identify periods of strong or weakening liquidity and adjust their trading approach accordingly. Bid-Ask Spread The bid–ask spread is one of the most direct and widely used indicators of liquidity in the forex market. In simple terms, the spread represents the difference between the price buyers are willing to pay (bid) and the price sellers are willing to accept (ask). The key reason the spread reflects liquidity is competition. When many buyers and sellers are active, prices cluster closely together and spreads remain tight. When participation drops and liquidity weakens, spreads widen because fewer orders are available at nearby prices. For example, EUR/USD typically trades with very narrow spreads during the London–New York overlap, when liquidity is at its highest. During off-hours or around major news events, those same spreads can widen noticeably as liquidity temporarily declines. As a result, monitoring changes in the bid–ask spread provides traders with a quick and practical way to gauge current liquidity conditions before entering a trade. Market Depth Market depth describes the number and distribution of buy and sell orders at different price levels. In simple terms, it shows how much volume the market can absorb before prices need to move significantly. When market depth is strong, there are sufficient orders on both sides of the market across multiple price levels. This allows trades, both small and large, to be executed without causing sharp price changes, which is a clear sign of healthy liquidity. In contrast, shallow market depth means fewer orders are available. Even modest trades can push price quickly from one level to another, increasing volatility and execution risk. As a result, weak market depth is often associated with low-liquidity conditions. This is why market depth is particularly useful for understanding how resilient the market is to order flow, not just how active it appears on the surface. Price Impact Price impact refers to how much the market price moves as a result of a trade or series of trades. In simple terms, it measures how sensitive price is to buying or selling pressure. In high-liquidity markets, price impact is usually low. There are enough buyers and sellers, and orders are spread across multiple price levels, so trades can be absorbed without causing large price changes. This allows prices to move gradually and reflect genuine supply and demand. In low-liquidity conditions, price impact increases. Fewer available orders mean that even relatively small trades can push prices sharply higher or lower. As a result, markets can become jumpy and less predictable. For this reason, observing how much prices move in response to trading activity provides another practical way to assess liquidity in the forex market. Liquidity Measurement Summary Table To put it simply, different liquidity indicators behave very differently depending on how active the market is. The table below summarises how the most common liquidity measures typically appear under high and low liquidity conditions. Liquidity Indicator High Liquidity Conditions Low Liquidity Conditions Trading Volume High and consistent activity Low or sporadic activity Bid–Ask Spread Narrow and stable Wide and unstable Market Depth Deep order book across price levels Thin order book with gaps Price Impact Minimal price movement per trade Large price movement per trade As a result, traders often assess several of these indicators together rather than relying on a single measure when evaluating liquidity. Tools to Assess Liquidity Traders don’t need to guess liquidity conditions. In simple terms, several practical tools can help assess how active and efficient the forex market is at any given time. Common tools used to assess liquidity include: Volume indicators – Show changes in trading activity and participation. Rising volume often signals improving liquidity, while falling volume suggests it may be drying up. Economic calendars – Highlight upcoming data releases or events that may temporarily reduce or disrupt liquidity before and after announcements. Trading platforms – Real-time spreads, execution speed, and (where available) depth-of-market information offer direct insight into current liquidity conditions. By combining these tools, traders can better anticipate changes in spreads, execution quality, and risk. For this reason, liquidity assessment is most effective when multiple signals are considered together rather than in isolation. How to Use Liquidity in Forex Trading Understanding what liquidity is in the forex market allows traders to apply this knowledge more effectively in real trading situations. In simple terms, liquidity helps traders decide what to trade, when to trade, and how much risk to take. Liquidity is not about predicting price direction. Instead, it helps traders assess the quality of the trading environment. High-liquidity conditions generally support smoother execution and lower costs, while low-liquidity conditions require more caution and adjustment. By recognising changes in liquidity, traders can adapt their strategies rather than forcing trades in unfavourable conditions. For this reason, liquidity awareness is a practical skill that improves consistency over time. Identifying Liquid Markets Markets with high liquidity typically have a large number of participants and steady trading activity. In simple terms, liquid markets are easier to trade because prices form efficiently and orders are filled reliably. Traders can identify liquid markets by observing: Consistently tight bid–ask spreads Strong and stable trading volume Smooth price movement with fewer gaps Major currency pairs traded during active sessions usually meet these criteria. As a result, identifying liquidity helps traders understand execution conditions before placing trades rather than discovering problems after entering a position. Timing Trades Liquidity varies throughout the trading day, and timing trades around liquidity conditions can significantly improve execution quality. In simple terms, trading when liquidity is high reduces friction and uncertainty. Many traders focus on: Session opens Major session overlaps Periods of increased institutional participation By aligning trades with high-liquidity periods, traders often benefit from tighter spreads, faster execution, and more reliable price action. For this reason, timing is not just about volatility, but also about liquidity. Read more：Best time to trade forex: When to enter the market during the day Risk Management and Liquidity Changes in liquidity can directly affect volatility, execution quality, and overall risk. In simple terms, lower liquidity increases uncertainty, while higher liquidity helps contain risk. The table below outlines common risks associated with different liquidity conditions and how traders typically manage them. Read more:Forex risk management: 10 tips to manage 6 key risk types in trading Liquidity Condition Potential Risks How to Manage High Liquidity Overconfidence, overtrading Maintain discipline and position sizing Decreasing Liquidity Rising spreads, slippage Reduce trade size, tighten exposure Low Liquidity Poor execution, price gaps Avoid trading or trade selectively Sudden Liquidity Changes Sharp moves, stop slippage Use conservative stops and reduced leverage As a result, effective risk management always considers current and expected liquidity conditions. Managing Trading Costs Liquidity has a direct influence on overall trading costs. In simple terms, the less liquid the market, the more expensive it becomes to trade, both visibly and invisibly. Direct costs include bid–ask spreads and transaction fees, which are usually easy to observe before entering a trade. These costs typically rise as liquidity falls. Indirect costs emerge during execution and trade management. Slippage, delayed fills, and reduced execution quality are more common in low-liquidity environments. As a result, the final execution price may differ from what was initially expected. Cost Type Source Relation to Liquidity Direct Costs Spreads, commissions Increase as liquidity weakens Indirect Costs Slippage, execution risk Rise sharply in thin markets Total Trading Costs Combined impact Highest in low liquidity For this reason, traders who understand liquidity are better equipped to evaluate the true cost of trading rather than focusing solely on spreads. Read more:What Is the Spread in Forex? Learn to Calculate and Trade It FAQ Which forex trading pair has the most liquidity? EUR/USD is the most liquid forex pair due to its high daily trading volume and broad participation from banks, institutions, and retail traders worldwide. Can AI predict liquidity changes? AI can analyse historical data, volume patterns, and market conditions to identify potential liquidity shifts, but unexpected news and events can still cause sudden changes that are difficult to predict and even AI struggles with this. What is liquidity in simple terms? Liquidity is how easily you can buy or sell an asset without affecting its price. High liquidity means trades are quick and efficient, while low liquidity means trading is slower and more costly. Is high or low liquidity better? High liquidity is generally better for most traders because it offers tighter spreads, smoother execution, and lower overall risk. What happens when liquidity is high? When liquidity is high, spreads tend to be tight, execution is faster, and price movements are more stable and predictable. What is the difference between liquidity and volatility? Liquidity refers to how easily trades can be executed, while volatility measures how much prices move. A market can be liquid but volatile, or illiquid and quiet. Does liquidity change throughout the trading day? Yes, liquidity changes as global trading sessions open and close, with the highest liquidity usually occurring during major session overlaps. Does news impact liquidity in the forex market? Yes, liquidity often decreases before major news releases as traders step aside, then increases again once uncertainty clears. Conclusion Liquidity is one of the most important yet often overlooked forces in the forex market. It influences execution speed, trading costs, price stability, and risk exposure, often determining whether a trade feels smooth or frustrating. By understanding how liquidity works, how it changes, and how it can be measured, traders gain a clearer picture of market conditions. Adjusting strategies to match liquidity, rather than fighting it, can lead to better execution, lower costs, and a more consistent trading experience over time. 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  ●  Strong start to the week for metals   ●  Oil markets sink lower   ●  US stocks hit record highs Metals rise as one The rally in precious metals appeared to have some juice left in the tank early this week. The gaps from Monday’s open have yet to be closed, and gold is now challenging $4,500 per ounce for the second time. The developments in Venezuela caught markets off guard, but the safe-haven flows are by no means contained to gold. Silver is once again outpacing its golden counterpart, pumping over 10% already since Monday, comfortably closing yesterday’s session north of $80 an ounce. Supply and demand dynamics are playing at least some part in the rise in metals, as platinum and palladium are matching the gains in silver move for move, while copper futures hit an all-time high yesterday of $6 per pound. Increased industrial demand, coupled with the potential for tariffs and export restrictions alike, may continue to put pressure on metals for a while longer. In the immediate term, volatility remains high and the next direction of travel is as mysterious as ever. An interesting start to the year. Oil markets unflustered In stark contrast, oil markets are facing no shortages whatsoever. Crude prices have largely shrugged off the weekend’s events in Venezuela and the Brent Crude index is already back down to $60 per barrel. Adding to oversupply fears, President Trump has announced that “Venezuela will be turning over between 30 and 50 million” barrels of oil to the United States. Not that anyone is in any great need of it – the West Texas Intermediate is also facing near-record lows of $56 per barrel. All fun and games for traders in Chevron (CVX) however, which pumped 5% on Monday, only to retrace the entire move the following day. Dow Jones outperforms Markets will be granted a glimpse into the health of the US economy later today, thanks to the December ADP employment change and ISM services PMI. US stock markets are still in a jovial mood, with the Dow Jones hitting back-to-back record highs over the past couple of days and closing above 49,000 points for the first time yesterday. The S&P 500 also notched a fresh record on Tuesday, while the Nasdaq remains a little off the boil. Memory giants Sanisk (SNDK) and Micron (MU) were the outliers, gaining 28% and 10% respectively. #Metals #Oil #StockMarket

I’m often slightly baffled when writing educational forex articles as to why so many traders struggle to make consistent money in the forex markets. The irony is that most of them actually know quite a lot. The problem isn’t what they know, it’s what they don’t know that really matters. After spending 14 years working in trading, extracting money from the markets has become second nature for me. Not because of some magical indicator or secret strategy I possess, but because I understood how the real money actually trades. And that’s where most retail traders go wrong especially the newbies when they first try their hand at trading. Why Most Forex Traders Are Guessing Here’s a statistic that should make you sit up and listen:   ●  Bank traders account for roughly 5% of all forex traders   ●  Speculators make up the other 95%   ●  That 5% of bank traders controls around 92% of total FX volume Let that sink in. If you don’t understand how that 5% trades, then you’re not really trading, you’re guessing. Educated guessing, perhaps, but guessing all the same. Now, let me clear up one of the biggest myths about institutional traders. They do not sit there all day hammering the buy and sell buttons, scalping ten pips at a time to hit their daily targets. In reality, most of their activity is simply executing orders for clients, something commonly referred to as clearing the flow. They may process thousands of trades a day, but almost none of those are for their own book. How Bank Traders Actually Trade Forex When it comes to proprietary trading, the trades that actually matter, bank traders typically place two or three trades a week. That’s it. These are the trades they’re judged on at year-end. These are the trades that determine bonuses. And as you can imagine, they’re not taken lightly. Bankers like to brag about their bonuses, size does matter! So no, bank traders are not glued to five-minute charts, desperately scalping to “make their number.” They are methodical, patient, and highly selective. Trades are only placed when technical and fundamental conditions line up. That’s the part retail traders need to understand. Why Your Charts Are Probably Working Against You I’m often genuinely dumbfounded when new clients show me their charts. They’re usually littered with indicators, oscillators on top of oscillators, many of which lag price by three or four hours and frequently contradict each other. Trading like this is one of the fastest ways I know to demolish a trading account. Bank traders’ charts look nothing like this. In fact, they’re almost boring by comparison. All they want to know is:   ●  Where are the key levels?   ●  Where is price likely to react? That’s it. Indicators were designed to try and predict the market. Bank traders don’t need to predict it, they are the market. If you understand how they operate, indicators become largely redundant. Their technical analysis boils down to one thing: support and resistance. Clean charts. No clutter. No distractions. Just the levels that actually matter. Now, before anyone gets excited, I’m not going to go into precise entry techniques here, because they’re almost never where people think they are. Trendlines are simply reference points. Execution is a completely different conversation. The Real Driver: Fundamentals Where bank traders really earn the bulk of their money is through fundamentals. The fundamental backdrop of any currency is shaped by three major forces: 1. Economic data 2. Central bank policy 3. Political influence And this is why currency direction can sometimes look messy. When political noise contradicts central bank messaging, markets become choppy and directionless. But when political conditions are stable, central bank policy is clear, and economic data supports that policy, that’s when big, clean trends emerge. That’s what bank traders wait for. Mastering fundamentals is not easy. It’s complex, nuanced, and takes years to truly understand. But if you do understand it, you’re positioning yourself on the right side of long-term currency direction, which is where real money is made. Trading Economic Data (The Right Way) There is a huge amount of money to be made trading economic releases, but only if you do it properly. Two things are essential: 1. A deep understanding of how different data points affect currencies 2. The ability to execute trades decisively, without hesitation If you hesitate, the opportunity is gone. These are the same economic releases that central banks base policy decisions on. By following and trading them correctly, you’re not only staying aligned with monetary policy, but you’re also growing your capital at the same time. This is professional trading. Not gambling. Capital Management: The Part Everyone Ignores To trade successfully over the long term, you need a comprehensive capital management system. This isn’t optional, it’s your entire business plan. A proper system should:   ●  Protect capital during uncertain periods   ●  Allow for capital expansion when conditions are right   ●  Define risk-to-reward, position sizing, and exits in advance When this is in place, your only job while trading is identifying high-quality opportunities. The stress disappears. You’re no longer glued to screens, panicking over every tick. And here’s a reality check: most bank traders spend large parts of the day chatting on the desk, speaking with other traders, or heading out to lunch with brokers. They are not staring at charts all day. Neither should you be if you are trading smarter. Trading With the Market, Not Against It From there, it’s simply about understanding which strategies to apply, and when to apply them. Plenty of traders talk about “beating the bankers.” I’ve even seen entire books written on it. But that misses the point entirely. You don’t want to beat them. You want to join them. Trade with the market, not against it. Final Thoughts There are no miracle secrets in forex trading. No magic indicators. No robots that can truly adapt to a dynamic, global market. The future maybe going that way, but we are not there yet. Success comes from understanding how the major players analyse, trade, and manage risk. Get those foundations right, and you’re already miles ahead of most retail traders. At its core, making money in the markets is no different from any other business. Walmart and JP Morgan operate on the same principle; they just sell different products. Buy at wholesale prices. Sell at retail prices. Forex is not so different.

  ●  Precious metals gap up   ●  Chip stocks surge higher   ●  Non-farm payrolls on Friday Precious metals regain momentum Happy New Year. Markets are currently reacting to the events that unfolded in Venezuela over the weekend. Precious metals all opened with sizeable gaps to the upside this morning and pushed higher still as safe-haven flows pushed prices higher. Gold quickly reclaimed $4,400 per ounce after the opening bell, while silver managed to briefly claw its way back over $76 after closing below $73 last Friday. Platinum and palladium are once again extremely volatile at the start of the week, with wicks in both directions. Interestingly, copper is also up strongly this morning, touching $5.80 per pound and rapidly approaching a new record high. While the latest developments in Venezuela appear to be relatively contained for the time being, many investors will take any excuse they can get to pile on precious metals. Chip stocks surge While US futures are largely unchanged, a number of Asian stock exchanges also gapped up this morning. The Japanese Nikkei 225 opened for trading for the first time this year, after being closed last Friday, and wasted no time climbing higher thanks to gains in tech stocks, in line with the surge in chip stocks in the US last week. The broader Topix index rose straight to record highs as soon as the stock market opened for the day, as did the Korean Kospi index. Chip stocks are fully back in focus, with Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung undergoing huge spikes this morning, matching the surge in ASML Holding (ASML) last Friday. Conversations are once again turning to chip shortages, to the benefit of the companies vying to meet the incessant demand. Bitcoin stirs Cryptocurrencies are finally showing some signs of life, with Bitcoin electing to push back over $92,500 early this morning. Despite reaching a record high in 2025, Bitcoin’s performance last year was disappointing to say the least, culminating in a 6% loss overall. In a year where every major stock index hit record highs, to say nothing of the staggering rallies in precious metals, cryptocurrencies severely underperformed in comparison. The crypto industry impatiently awaits the Clarity Act, no doubt delayed by last year’s government closure, but the bill remains alive and well, if various insiders are to be believed. Crypto will need a new narrative to leverage at some point; progress on the regulation front might just be the ticket. Muted crude oil markets Difficult to speak of Venezuela without mentioning oil markets, but as mentioned above, the weekend’s events appear to be contained for now. Despite Venezuela’s position as an oil producing nation and as a founding member of OPEC, there has been very little reaction in crude markets so far. The South American nation sits on the largest, proven reserves of oil in the world, but its production output has fallen short of the big players for decades already, in large part due to poor management, dated infrastructure and a lack of investment. Taking Venezuela out of the picture is unlikely to shift supply/demand dynamics in a major way, as reflected in the lack of reaction in the Brent Crude index. The week ahead This week, for the first time in months, traders will be treated to a full schedule of US labour data. Wednesday presents the latest ADP employment change and JOLT survey, followed on Thursday by the usual jobless claims, but the big event of the week is of course the December NFP report, this time published on the first Friday of the month as intended. Predictions are currently standing at 57k new jobs and an unemployment rate of 4.5%. For many, the report will mark a return to business as usual. #Metals #NFP #Oil

What Is a Currency Pair? A currency pair is the quotation of two different currencies, where the value of one currency is expressed relative to the other. In forex trading, a currency pair shows how much of one currency is needed to exchange for one unit of another currency. In simple terms, a currency pair represents a comparison between two currencies rather than the standalone price of a single currency. This matters because currencies derive their value from economic strength, interest rates, and market confidence relative to other countries. Currencies within a pair are identified using standardized ISO currency codes. These internationally recognised three-letter codes ensure that each currency is clearly defined and consistently represented across the global forex market. How Does a Currency Pair Work? In the forex market, every transaction always involves two currencies at the same time. When one currency increases in value, the other currency in the pair must decrease in relative terms. This is because forex prices are based on an exchange relationship rather than a standalone valuation. To put it simply, a currency pair compares one currency against another. The first currency listed is known as the base currency, while the second is called the quote currency. The exchange rate shows how much of the quote currency is needed to equal one unit of the base currency. For example, the currency pair EUR/USD expresses the value of the euro relative to the U.S. dollar. If the value of the euro strengthens compared to the dollar, the exchange rate will rise. If the euro weakens, the exchange rate will fall. This is how relative value changes are reflected in forex prices. This structure matters because it explains why currencies cannot move independently in the forex market. Every change in price reflects shifting economic conditions, expectations, or sentiment between two economies at the same time. Examples of Currency Pair Exchange Rates A currency pair exchange rate is usually displayed as a single numerical value, such as 1.05928. This number represents how much of the quote currency is required to exchange for one unit of the base currency. In simple terms, it shows the relative value between the two currencies at that moment in time. For example, if EUR/USD is quoted at 1.05928, this means that one euro is equivalent to 1.05928 U.S. dollars. If you were to exchange 100 euros, you would receive 105.928 U.S. dollars based on that exchange rate. This example helps illustrate how the quoted price translates into a real-world currency conversion. The key reason why this is important to learn is because exchange rates provide a standardised way to compare currencies globally. Rather than assigning an absolute value to a currency, the forex market continuously updates how currencies are valued relative to one another. As a result, exchange rates act as a real-time reflection of global economic relationships. Because exchange rates are always expressed as pairs, every price movement reflects changes in supply, demand, or perception affecting both currencies involved. This paired structure is fundamental to understanding how the forex market operates. Types of Currency Pairs Exchange rates represent the relative value between two currencies from different countries, and their movements are influenced by a wide range of economic and market factors. Because not all currencies behave in the same way, the forex market groups currency pairs into different categories based on their characteristics, liquidity, and typical market behaviour. In simple terms, different types of currency pairs exist because some currencies are traded far more frequently than others. Pairs involving the world’s largest economies tend to attract more market participation, while those linked to smaller or developing economies may behave differently due to lower liquidity or regional influences. There are currently several recognised categories of currency pairs in the forex market. These include major forex pairs, minor and cross currency pairs, exotic currency pairs, as well as broader classifications such as G10 currencies, CEE currencies, BRICS and BRIICS, BRICS+, and crown currencies. Each category reflects a distinct combination of economic scale, market depth, and global relevance. This categorisation matters because it helps market participants focus on currency pairs, they understand best. By recognising how different currency pair types behave, it becomes easier to interpret exchange rate movements and place them into a broader market context. Major Forex Pairs Major forex pairs are the most widely traded currency combinations in the global foreign exchange market. These pairs typically involve the world’s largest and most economically influential countries, which results in high levels of market participation and liquidity. In simple terms, major currency pairs are popular because they are traded frequently and attract a broad range of participants, including banks, corporations, governments, and institutional investors. Their high trading volume helps ensure that prices are formed efficiently and reflect global supply and demand conditions more accurately. Major forex pairs are often viewed as a benchmark for overall market activity. Movements in these pairs can offer insight into global economic trends, risk sentiment, and shifts in monetary policy expectations. There are seven currency pairs commonly recognised as major forex pairs in the global market: EUR/USD USD/JPY GBP/USD USD/CHF AUD/USD USD/CAD NZD/USD These pairs form the core of forex market activity and are often the first reference point for understanding how currency markets operate. EUR/USD EUR/USD is the most actively traded currency pair in the forex market and represents the exchange rate between the euro and the U.S. dollar. It reflects the economic relationship between the euro area and the United States, two of the world’s largest and most influential economic regions. In simple terms, this pair is closely watched because it combines high liquidity with broad global participation. As a result, price movements in EUR/USD are often seen as a general barometer of global market sentiment and economic confidence. Because of its depth and transparency, EUR/USD is commonly perceived as one of the clearest and most widely followed currency pairs in the forex market. For this reason, it is often used as a reference point when observing broader currency market trends. USD/JPY USD/JPY represents the exchange rate between the U.S. dollar and the Japanese yen and is one of the most actively traded currency pairs globally. This pair reflects the economic relationship between the world’s largest economy and Japan, a major exporter with a long-established role in global finance. To put it simply, USD/JPY is often associated with shifts in global risk sentiment and monetary policy expectations. Movements in this pair can reflect changing views on interest rate differentials, economic growth, and broader market confidence. Because of its strong liquidity and sensitivity to macroeconomic developments, USD/JPY is generally perceived as a key indicator of market sentiment, particularly during periods of heightened global uncertainty. For this reason, it remains a closely observed pair within the forex market. GBP/USD GBP/USD represents the exchange rate between the British pound and the U.S. dollar and is one of the oldest and most well-known currency pairs in the forex market. It reflects the economic relationship between the United Kingdom and the United States, two major financial centres with long-established global influence. In simple terms, this currency pair is known for responding strongly to economic data, monetary policy expectations, and political developments in both countries. Changes in growth outlooks, inflation trends, or policy direction can all influence how this pair is valued over time. GBP/USD is generally perceived as a liquid but more reactive major currency pair, often displaying clearer directional movements during periods of heightened economic or political focus. For this reason, it is widely followed as a reflection of both UK and US economic conditions. The GBP/USD currency pair is known as the "Cable" because of the transatlantic telegraph cablelaid in the 19th century that was used to transmit the exchange rates between the British pound and the US dollar. USD/CHF USD/CHF represents the exchange rate between the U.S. dollar and the Swiss franc. This pair reflects the relationship between the United States and Switzerland, with the Swiss franc historically associated with financial stability and a strong banking sector. In simple terms, USD/CHF is often linked to changes in global risk perception and monetary policy expectations. Shifts in confidence, interest rate outlooks, or broader economic uncertainty can influence how this pair is valued relative to other major currencies. USD/CHF is generally perceived as a more defensive major currency pair, particularly during periods of market stress. For this reason, it is closely observed when investors reassess risk and capital preservation across global markets. AUD/USD AUD/USD represents the exchange rate between the Australian dollar and the U.S. dollar. This currency pair reflects the economic link between Australia, a major exporter of natural resources, and the United States, the world’s largest economy. To put it simply, AUD/USD is often influenced by global economic conditions and demand for commodities. Changes in economic growth expectations, trade activity, and broader market confidence can affect how this pair is valued over time. AUD/USD is generally perceived as a currency pair that reflects global growth sentiment. For this reason, it is commonly observed as an indicator of how market participants view economic expansion and international trade conditions. USD/CAD USD/CAD represents the exchange rate between the U.S. dollar and the Canadian dollar. This pair reflects the close economic relationship between the United States and Canada, which are major trading partners with deeply interconnected economies. In simple terms, USD/CAD is often influenced by economic conditions in North America as well as shifts in global demand for energy and raw materials. Changes in growth expectations, trade flows, and broader market sentiment can all affect how this pair is valued. Read more：What Is Market Sentiment? Definition, Indicators and Strategies USD/CAD is generally perceived as a major currency pair that responds to both macroeconomic data and regional economic developments. For this reason, it is widely monitored as an indicator of economic dynamics within the North American region. NZD/USD NZD/USD represents the exchange rate between the New Zealand dollar and the U.S. dollar. This pair reflects the economic relationship between New Zealand, a smaller open economy with strong trade links, and the United States. To put it simply, NZD/USD is often influenced by global economic conditions, agricultural trade, and shifts in overall market confidence. Changes in international growth expectations and trade-related developments can affect how this pair is valued relative to other major currencies. NZD/USD is generally perceived as a major currency pair that reflects global growth sentiment, similar to other commodity-linked currencies. For this reason, it is commonly observed as an indicator of broader economic optimism or caution in international markets. Major Currency Pair Reference Table The following table provides a clear reference for the major forex pairs, showing the countries involved and commonly used market terminology. This overview helps reinforce how each major pair represents an economic relationship between two leading global economies. Currency Pair Countries FX Geek Speak EUR/USD Eurozone / United States Euro vs Dollar USD/JPY United States / Japan Dollar Yen GBP/USD United Kingdom / United States Cable USD/CHF United States / Switzerland Dollar Swiss AUD/USD Australia / United States Aussie USD/CAD United States / Canada Dollar Loonie NZD/USD New Zealand / United States Kiwi This table highlights why major currency pairs are often considered the foundation of the forex market. Their global relevance, liquidity, and familiarity make them a common reference point when analysing exchange rate movements. Minor and Cross Currency Pairs A currency pair made up of two major currencies that does not include the U.S. dollar is known as a cross-currency pair. These pairs are also commonly referred to as minor currency pairs, or simply “minors,” within the forex market. In simple terms, cross currency pairs allow exchange rates to be observed directly between two non-U.S. dollar currencies. While they may not be traded as heavily as major pairs, many crosses still attract significant market interest due to the economic importance of the countries involved. The most actively traded cross currency pairs typically involve major non-U.S. dollar currencies such as the euro, Japanese yen, and British pound. These currencies play a central role in global trade and finance, which helps support liquidity and consistent pricing across many cross pairs. Understanding minor and cross currency pairs matters because they reflect economic relationships beyond the influence of the U.S. dollar. As a result, their movements can offer additional insight into regional economic dynamics and relative currency strength. Euro Crosses Euro crosses are currency pairs that involve the euro and another major currency, excluding the U.S. dollar. These pairs highlight the euro’s relationship with other major economies and allow direct comparison without using the dollar as an intermediary. In simple terms, euro crosses can reflect regional economic differences within Europe as well as economic links between the euro area and other developed markets. Because the euro is one of the world’s most actively traded currencies, many euro crosses still benefit from relatively strong liquidity. Currency Pair Countries FX Geek Speak EUR/CHF Eurozone / Switzerland Euro Swiss EUR/GBP Eurozone / United Kingdom Euro Sterling EUR/CAD Eurozone / Canada Euro Loonie EUR/AUD Eurozone / Australia Euro Aussie EUR/NZD Eurozone / New Zealand Euro Kiwi EUR/SEK Eurozone / Sweden Euro Krona EUR/NOK Eurozone / Norway Euro Krone These euro cross pairs are often observed to understand how the euro performs against other major global currencies. As a result, they can provide additional perspective on regional economic conditions and cross-border capital flows. Yen Crosses Yen crosses are currency pairs that include the Japanese yen paired with another major currency, excluding the U.S. dollar. These pairs highlight how the yen is valued relative to other major economies without the influence of the dollar. To put it simply, yen crosses often reflect shifts in regional economic conditions, global risk perception, and differences in monetary policy expectations. Because the Japanese yen plays a central role in global finance, many yen crosses remain actively observed despite generally lower liquidity than major pairs. Currency Pair Countries FX Geek Speak EUR/JPY Eurozone / Japan Euro Yen GBP/JPY United Kingdom / Japan Pound Yen CHF/JPY Switzerland / Japan Swiss Yen CAD/JPY Canada / Japan Loonie Yen AUD/JPY Australia / Japan Aussie Yen NZD/JPY New Zealand / Japan Kiwi Yen These yen cross pairs are commonly used to gauge how the Japanese yen performs against other major global currencies. As a result, they can offer insight into changing market sentiment and international capital movement trends. Pound Crosses Pound crosses are currency pairs that involve the British pound and another major currency, excluding the U.S. dollar. These pairs reflect how the pound is valued relative to other developed economies without using the dollar as a reference point. In simple terms, pound crosses often respond to economic conditions and policy developments in the United Kingdom as well as in the paired country. Because the pound is a widely traded currency, many pound crosses continue to attract market attention despite generally lower liquidity than major pairs. Currency Pair Countries FX Geek Speak GBP/CHF United Kingdom / Switzerland Pound Swiss GBP/AUD United Kingdom / Australia Pound Aussie GBP/CAD United Kingdom / Canada Pound Loonie GBP/NZD United Kingdom / New Zealand Pound Kiwi These pound cross pairs help illustrate how the British pound performs against other major global currencies. As a result, they provide additional context for understanding regional economic conditions and relative currency strength. Other Crosses Other cross currency pairs consist of combinations of major currencies that do not fall neatly into euro, yen, or pound cross groupings. These pairs still exclude the U.S. dollar and reflect economic relationships between developed economies. In simple terms, these crosses allow market participants to observe how two non-U.S. dollar currencies perform directly against each other. While they may attract less attention than euro or yen crosses, they can still provide useful insight into regional economic conditions and relative currency strength. Currency Pair Countries FX Geek Speak AUD/CAD Australia / Canada Aussie Loonie AUD/CHF Australia / Switzerland Aussie Swiss AUD/NZD Australia / New Zealand Aussie Kiwi CAD/CHF Canada / Switzerland Loonie Swiss NZD/CHF New Zealand / Switzerland Kiwi Swiss These other cross currency pairs help broaden the overall view of how major currencies interact outside the influence of the U.S. dollar. As a result, they add depth to the understanding of global currency relationships. Understanding Cross Currency Rates Cross currency rates describe how one currency can be exchanged for another through an intermediary currency, rather than being quoted directly. In many cases, this intermediary currency is the U.S. dollar, due to its central role in global foreign exchange markets. To put it simply, if a direct exchange rate between two currencies is not readily available, their relative value can be determined by comparing each currency against a third currency. For example, the value of one currency relative to another may be inferred by using both currencies’ exchange rates against the U.S. dollar. This process helps ensure consistent pricing across the forex market. As a result, cross currency rates allow currencies to be compared efficiently, even when direct market quotes are limited or less actively traded. Exotic Currency Pairs Exotic currency pairs consist of one major currency paired with a currency from a developing or emerging economy. These currencies typically belong to countries with smaller financial markets or economies that are still evolving within the global system. In simple terms, exotic currency pairs reflect economic relationships between major economies and emerging markets. Their exchange rates can be influenced by local economic conditions, regional political developments, and changes in global risk sentiment. Common examples of countries whose currencies are often included in exotic pairs include Brazil, Mexico, Indonesia, Poland, Chile, Turkey, and Hungary. These currencies represent regions with growing economic importance, but different market characteristics compared to major currencies. Currency Pair Countries FX Geek Speak USD/BRL United States / Brazil Dollar Real USD/HKD United States / Hong Kong Dollar Hong Kong USD/SAR United States / Saudi Arabia Dollar Riyal USD/SGD United States / Singapore Dollar Singapore USD/ZAR United States / South Africa Dollar Rand USD/THB United States / Thailand Dollar Baht USD/MXN United States / Mexico Dollar Peso USD/RUB United States / Russia Dollar Ruble USD/PLN United States / Poland Dollar Zloty USD/CLP United States / Chile Dollar Peso These exotic currency pairs highlight the diversity of the global forex market. As a result, they help illustrate how exchange rates can reflect both global influences and country-specific economic conditions. Crown Currencies Crown currencies refer to the currencies of certain Nordic countries whose currency names are derived from the word “krona” or “krone,” meaning “crown.” These currencies belong to developed, stable economies with strong institutional frameworks and well-established financial systems. In simple terms, crown currencies reflect the economic conditions of Northern European countries that operate outside the euro area. Their exchange rates can be influenced by regional economic performance, central bank policy decisions, and broader European market trends. Country Currency Name Currency Code Denmark Danish Krone DKK Sweden Swedish Krona SEK Norway Norwegian Krone NOK These currencies add further diversity to the forex market by representing advanced economies that maintain independent monetary policies. As a result, crown currencies provide additional insight into regional economic dynamics within Europe. G10 Currencies G10 currencies refer to the currencies of ten of the world’s most heavily traded and economically influential nations. These currencies dominate global foreign exchange turnover and form the backbone of liquidity in the forex market. In simple terms, G10 currencies are widely used in international trade, finance, and investment. Their high trading volume and strong institutional support contribute to relatively transparent pricing and consistent market participation. Country Currency Name Currency Code United States U.S. Dollar USD Eurozone Euro EUR United Kingdom British Pound GBP Japan Japanese Yen JPY Australia Australian Dollar AUD New Zealand New Zealand Dollar NZD Canada Canadian Dollar CAD Switzerland Swiss Franc CHF Norway Norwegian Krone NOK Sweden Swedish Krona SEK Denmark Danish Krone DKK Because of their central role in global finance, G10 currencies are often used as benchmarks when analysing exchange rate movements. As a result, they play a key role in shaping overall forex market dynamics. CEE Currencies CEE currencies refer to the currencies of Central and Eastern European countries. These currencies represent economies that are closely connected to the European Union but, in many cases, operate outside the euro area and maintain independent monetary policies. In simple terms, CEE currencies often reflect regional economic performance, capital flows, and sensitivity to political or policy developments within Europe. Compared to major currencies, they may display different liquidity characteristics and can react more noticeably to regional economic changes. Country Currency Name Currency Code Hungary Hungarian Forint HUF Czech Republic Czech Koruna CZK Poland Polish Zloty PLN Romania Romanian Leu RON These currencies add an additional regional dimension to the forex market. As a result, CEE currencies help illustrate how exchange rates can reflect both local economic conditions and broader European trends. BRIICS BRIICS refers to a group of large emerging market economies: Brazil, Russia, India, Indonesia, China, and South Africa. These countries represent a significant share of global population, production, and long-term economic growth potential. In simple terms, currencies associated with BRIICS countries often reflect trends in emerging markets, including industrial growth, commodity demand, and sensitivity to global economic and geopolitical developments. Their exchange rates can highlight how capital flows respond to changing risk perceptions and economic expectations. Country Currency Name Currency Code Brazil Brazilian Real BRL Russia Russian Ruble RUB India Indian Rupee INR Indonesia Indonesian Rupiah IDR China Chinese Yuan (Renminbi) CNY South Africa South African Rand ZAR These currencies play an increasingly important role in the global forex landscape. As a result, BRIICS currencies help illustrate how emerging economies influence international currency markets and global economic balance. BRICS+ BRICS+ refers to the expanded group of countries that have formally joined the original BRICS bloc, broadening its economic and geopolitical reach. This expansion reflects growing cooperation among emerging and energy-producing economies outside traditional Western-led economic groupings. In simple terms, BRICS+ highlights a shift toward a more multipolar global economic structure. The currencies of these countries can reflect changing trade relationships, regional influence, and evolving patterns of global capital movement. Countries that have officially joined the BRICS+ group include Saudi Arabia, the United Arab Emirates, Iran, and Egypt. These nations add significant economic diversity, particularly through energy production, regional trade links, and strategic geographic positioning. As a result, BRICS+ currencies further illustrate how global currency markets adapt to changing economic alliances and long-term structural shifts in the world economy. Comparison of Currency Pair Categories The following table compares the main currency pair categories to provide a clearer reference for their general characteristics. This comparison highlights how liquidity, volatility, and market behaviour can differ across categories. Category Features Liquidity Volatility Advantages Disadvantages Suitable For Suitable Strategies Major Forex Pairs Most traded pairs involving USD and major economies Very high Generally lower Transparent pricing, deep markets Highly competitive, smaller price swings Broad market observation Long-term analysis, macro comparison Minor & Cross Currency Pairs Major currencies excluding USD High to moderate Moderate Regional insight, diversification Lower liquidity than majors Regional focus Comparative analysis Exotic Currency Pairs Major paired with emerging market currencies Lower Higher Exposure to emerging economies Wider spreads, higher sensitivity Market research Long-term economic observation G10 Currencies Currencies of top global economies Very high Lower to moderate Strong liquidity, global relevance Highly efficient pricing Market benchmarking Broad economic analysis CEE Currencies Central & Eastern European currencies Moderate Moderate Regional economic insight Sensitive to local events Regional monitoring Economic trend analysis BRICS / BRIICS Large emerging market currencies Variable Higher Growth exposure Geopolitical sensitivity Global diversification Structural analysis Crown Currencies Nordic non-euro currencies Moderate Moderate Independent monetary policy insight Smaller market size Regional focus Comparative analysis This comparison helps place each currency category into context. As a result, it becomes easier to understand how different currency groups contribute to the structure of the global forex market. Why Are Major Currency Pairs Popular in Forex Trading? Major currency pairs are widely used in the forex market because they represent the most actively traded and economically significant currency combinations in the world. Their popularity is driven by a combination of high trading volume, strong liquidity, and close links to major global economies. In simple terms, major currency pairs are often preferred because their pricing reflects a broad range of market participants and information. This makes their exchange rates easier to observe, compare, and interpret within the wider context of global financial markets. The following factors help explain why major currency pairs continue to dominate forex market activity. Highest Trading Volume Major currency pairs have exceptionally high trading volumes, which means they are exchanged frequently throughout the global trading day. This constant activity contributes to smoother price formation and more consistent market behaviour compared to less actively traded pairs. Involves Major Economies Major currency pairs typically involve the world’s largest and most influential economies. Because these economies play a central role in global trade and finance, their currencies are closely watched and widely used as benchmarks in international markets. Deep Market Liquidity High liquidity means there are many buyers and sellers participating in the market at any given time. For major currency pairs, this depth helps prices reflect supply and demand efficiently and reduces the likelihood of abrupt price distortions. Transparent Pricing Major currency pairs benefit from extensive market coverage and readily available economic information. As a result, their prices tend to be more transparent, with exchange rate movements reflecting well-documented economic data, policy decisions, and global events. Core Forex Pairs Taken together, these characteristics explain why major currency pairs are often regarded as the core of the forex market. They provide a foundational reference for understanding how currencies are priced and how global economic forces influence exchange rates. Advantages of Trading Currency Pairs Trading currency pairs offers several advantages that help explain why the forex market attracts participants from around the world. These advantages are closely linked to the structure of the market, its global reach, and the way exchange rates are quoted and accessed. The following sections outline some of the key benefits associated with currency pairs in the forex market. Traded 24 Hours a Day The forex market operates almost continuously throughout the week, following the opening hours of major financial centres in Asia, Europe, and North America. This near-round-the-clock structure allows exchange rates to update continuously as global economic activity unfolds. High Market Accessibility Currency pair pricing is relatively easy to follow, and market information is widely available. In addition, forex trading does not require the physical exchange or storage of assets, which contributes to its accessibility and flexibility for market participants. Clear Price Structure Exchange rates directly express the value of one currency relative to another. This clear structure makes currency pricing easier to interpret compared to some asset classes that rely on more complex valuation models or multiple underlying components. Wide Range of Currency Choices The forex market includes major, minor, and exotic currency pairs, offering exposure to a broad range of economies and regions. This diversity allows currency markets to reflect different economic conditions, growth profiles, and regional influences. Taken together, these advantages help explain why currency pairs form the foundation of the global forex market. As a result, they remain a central focus for understanding how international currencies interact. Disadvantages of Trading Currency Pairs While currency pairs offer many advantages, they also come with certain limitations that are important to understand. Exchange rates are influenced by a wide range of factors, which can introduce complexity and uncertainty into currency markets. The following sections outline some of the key challenges associated with trading currency pairs. High Price Volatility Exchange rates can experience significant price fluctuations, sometimes within short periods of time. Even major currency pairs may move rapidly in response to changing economic conditions or shifts in market expectations. News and Data Sensitivity Currency pairs are highly sensitive to economic data releases, central bank decisions, and major global events. Unexpected developments can lead to sharp movements in exchange rates, reflecting rapid changes in market sentiment. Multi-Economic Exposure Unlike assets linked to a single economy, currency pairs are influenced by two different countries at the same time. As a result, exchange rate movements reflect the interaction between two sets of economic conditions, policies, and market dynamics. Lower Profit Margins Major currency pairs often feature high liquidity and efficient pricing. While this contributes to transparency, it can also mean that individual price movements are relatively limited compared to less liquid currency pairs. Crowded Market Risk Because major currency pairs attract a large number of market participants, market behaviour can sometimes become highly synchronised. This can amplify price movements or contribute to sudden reversals when market expectations shift. Understanding these disadvantages helps place currency pair behaviour into context. As a result, it becomes easier to appreciate both the opportunities and limitations present in the forex market. What Factors Affect Major Currency Pair Exchange Rates? Major currency pair exchange rates do not move randomly. Their movements are influenced by a range of economic, political, and financial factors that shape how currencies are valued relative to one another. In simple terms, exchange rates reflect how market participants interpret current conditions and future expectations for two different economies. The following factors are among the most important influences on major currency pair movements. Interest Rates Interest rate policies set by central banks play a central role in influencing exchange rates. Differences in interest rates between countries can affect how currencies are valued, as monetary policy decisions shape economic conditions and financial expectations. Economic Data Reports Economic indicators such as employment data, inflation figures, and gross domestic product growth provide insight into a country’s economic health. Strong or weak data can influence confidence in a currency by shaping expectations about future economic performance. Politics and Global Events Political stability and policy direction can have a significant impact on exchange rates. Elections, policy changes, and geopolitical developments may influence market confidence and often affect multiple major currency pairs simultaneously. Market Sentiment Market sentiment reflects how participants collectively perceive risk and future prospects. Even in the absence of major data releases or events, shifts in sentiment alone can drive exchange rate movements across the forex market. Together, these factors help explain why currency values change over time. As a result, exchange rate movements can be better understood when viewed through a broader economic and market context. Read more：What Is Market Sentiment? Definition, Indicators and Strategies Why Currency Pairs Matter in Forex Trading Currency pairs are the core building block of the forex market. They are not only the basic unit used to quote prices, but also a direct reflection of how global capital flows between countries and economies. In simple terms, currency pairs show where money is moving and how economic strength is being re-priced in real time. Every change in an exchange rate reflects shifting expectations about growth, inflation, interest rates, or stability between two economies. When currency pairs are not properly understood, it becomes difficult to interpret what market movements actually represent. A price change may be misread as strength or weakness in one currency, without recognising the role the second currency plays in that movement. This matters because forex prices are always relative. Without a clear understanding of how currency pair’s function, exchange rate movements can appear confusing or contradictory. As a result, currency pairs serve as an essential framework for understanding how the global forex market operates. FAQ What is a currency pair in forex? A currency pair in forex is a quotation that shows the value of one currency relative to another. It represents how much of one currency is needed to exchange for one unit of another currency. How many currency pairs are there? There are dozens of currency pairs available in the forex market, including major, minor, and exotic pairs. The exact number can vary depending on market availability and classification. Which currency pairs are most suitable for beginners to trade? Major currency pairs such as EUR/USD, GBP/USD, and USD/JPY are generally considered easier to follow due to their high liquidity and transparent pricing. Exotic currency pairs may be less suitable for beginners because they often behave differently and have lower liquidity. What are the most volatile currency pairs in the forex market? Currency pairs involving smaller or emerging economies often experience higher volatility, especially during periods of economic or political uncertainty. Volatility levels can change over time depending on market conditions. What is the difference between major, minor, and exotic currency pairs? Major currency pairs involve the U.S. dollar and the world’s most traded currencies, minor pairs exclude the U.S. dollar, and exotic pairs include currencies from developing or emerging economies. Conclusion In conclusion, currency pairs form the foundation of the forex market and are essential for understanding how exchange rates are priced and interpreted. Every forex quotation represents a relationship between two economies, reflecting shifts in economic strength, confidence, and global capital flows. By understanding how different types of currency pair’s function and how their characteristics vary, market participants can better place exchange rate movements into context. This structured understanding helps clarify why currencies move as they do under different market conditions. Ultimately, currency pairs provide the framework through which the global forex market operates. A clear grasp of their structure and behaviour supports more informed observation and interpretation of currency markets as a whole. Try these Next What is margin trading and how it works in forex？ What is leverage and how it works in forex trading？ What Is the Spread in forex? Learn to Calculate and Trade It What is slippage and how to avoid it in trading What are pips in forex and how to calculate their value