In the forex trading market, currency pairs just about denote what Jeans means to Levi’s. It is the ‘commodity’ that is the basis of all transactions. Currency pairs represent how much it would cost to buy a quoted currency with respect to a base currency. Calculating the value requires a comparison between both currencies to arrive at the value at which one currency in the pair is traded against another. The base and quoted currency labels are used for the first and second currency in a currency pair. Trading a currency pair entails buying the base currency against the quoted one.
The forex market is the largest of all the financial markets in the world. The total volume of money traded every day as per the 2017 stats is round about $ 5.7 trillion. With a market size this big, there is a huge number of investor flocking in the forex market to make it big with the amount of money they are investing in the business.
The only thing that the investors seem concerned about is which currency is most suitable to trade in the current circumstances. As the whole world these days, from Far East to the entire West is under siege due to several reasons ranging from Middle East war, Refugee crisis, China’s emergence to power, Russia’s resurgence, North Korean nuclear issue, the recent Iranian chaos and so much more that the world is entering with in 2018. Amidst all these crises and issues, an investor remains ambivalent regarding the currency he should invest in as the political scenarios are the 1st thing to influence the economy and hence the currency price. The recent development in the world political state has changed the value of many currencies from different states. Therefore, we have collected an analysis based review of all the currencies that can see a dip or rise in the year 2018. From most traded currency pair to the exotic ones, we will focus on what is going to be the pair of the year.
One of the most frequently traded currency pairs is the Euro-US Dollar currency pair, using this as a basis to explain further we can say that a rate of 150:100 means 1.5 Euro/Dollar. Euro is considered to be the base currency whilst the US dollar is the quote currency. A dollar has a determined value of 1.5 Euros in this case against Euro as the base currency.
The number of currency pairs is exceedingly large and investment decisions are based on the level of knowledge that an investor has about a pair. There are two main classifications of currency pairs which are Major and minors plus exotics. Exotics refer to currency pairs which include an emerging market, these pairs exhibit low liquidity and wider spreads when compared with minor currency pairs.
Minor pairs refer to as currency pairs which do not include the US Dollar, these are sufficiently liquid markets with slightly larger spread than the Major Currency pairs. The currencies that trade the most against the US dollar are denoted to as major currencies and any one of them against the US Dollar denote a major currency pair. The defining characteristic of any major currency pair is round the clock trade and extremely high liquidity with very low spreads.
Investor knowledge can be increased through research on any given currency pair, however that may not provide conclusive results, in such situations using a forex trading software with help from any credible forex signal indicator can provide that essential piece of information that may be required in making the final decision. Similarly, help in these matters can be taken from Algorithmic software that has the capacity to execute decisions when the trader cannot foresee the trends, its the algorithmic software that can read the indicators and execute the action using the expert advice.
While making a decision regarding what and how to trade in the new year, an investor can learn a lot from the above mentioned information, the most eye-catching and optimal currency pairs would have to come from the major currency pairs. Let’s have a look at the most lucrative ones for the last year.
Chosen Currency Pairs
Keeping all major currencies in mind 2018 seems to be a year in which all currency pairs which include the US dollar as one side would be the most lucrative options. We recommend the following out of which the last two would be discussed in detail.
- Euro to the US Dollar with a very low spread offering good returns for forex dealers.
- USD to GBP.
- USD to JPY
- USD to WON(Korea)
At the start of the previous year, the election in the United States for the presidency had a negative impact on the Dollar as people thought that the newly elected candidate would result in the whole world coming to an end, thankfully that was not the case and the dollar has been growing stronger than ever, most notably against the JPY up to a significant 11.5% since the election day.
This also coincided with the Bank of Japan’s introduction of Quantitative and Qualitative Monetary Ease with Yield Curve control which was introduced a couple of months before the elections. It is a policy tweak which is aimed at keeping the nominal bond yield as 0% for the 10-year governmental bonds.
The first half of 2018 indicates selling Japanese Yen(JpY) as the top priority as it will give a massive yield of about 15 percent. Buying the US Dollar against the Japanese Yen is something that is considered to be the most profitable currency pair to trade. This currency pair exhibits a low spread and more trading potential.
Apart from this the Korean WON to the US Dollar is also something that is a viable option, this will likely be a continuing trend. Looking at several credible projections till the first quarter of 2019, it can easily be deduced that the WON will depreciate progressively against the dollar by almost 12 percent hitting the trough in February 2019 after which a period of correction follows.
The above mentioned currency pairs are chosen each for a unique reason, the Eurodollar currency pair is the most frequently traded and the most reliable one, the GBP Dollar currency pairs offer extensive market insight options and the last two are chosen because they are likely to exhibit very high returns in 2018.