The foreign exchange market is the largest decentralized financial market in the world, with a daily volume of $6.6 trillion! (figure as of 2022). That’s larger than even Japan’s GDP!

The majors involve currencies like Euro, US dollar, Japanese yen, Pound sterling, Australian dollar, Canadian dollar, Swiss franc and the New Zealand Dollar. Opinions differ somewhat over a definitive list of major currencies, but almost all will include the traditional ‘four majors’ – EUR/USD, USD/JPY, GBP/USD and USD/CHF – as well as the three most-traded ‘commodity currencies’ against the US dollar, which are AUD/USD, USD/CAD and NZD/USD.

There is a priority ranking for all the major currencies from which the order of pairs is derived. See the next question !

The prevailing forex market quotation convention gives precedence to certain currencies over others that affects whether they are usually quoted as the base currency or the counter currency in a currency pair. This established priority ranking or “pecking order” for six of the most commonly traded currencies is as follows: EUR > GBP > AUD > NZD > USD > CHF > JPY.

The nickname “cable” originated from the communications cable under the Atlantic Ocean, which synchronized the GPB/USD quote. Similarly the USD-CAD pair is called Loonie and the EUR-USD pair is called Fiber.

In the context of the currency market, the term “liquidity” refers to the degree to which forex market is able to handle a purchase or sale transaction without causing a substantial change in the exchange rate for the currency pair in question.

Because there is a lower trading volume and liquidity of these pairs, they represent high-risk trades and are therefore referred to as “exotic pairs”.

Cross currency pairs are those that don’t contain the US dollar. Cross currency pairs that involve the euro, are often called euro crosses. GBP/EUR is a key currency pair that explores the relationship between the British pound and the euro. The nickname for this pair is ‘chunnel’, representing the connection between Britain and Europe via the Channel Tunnel which runs from Dover to Calais.

Of these patterns the head and shoulders and triangle patterns are both relatively simple patterns which are often used by traders.

The head and shoulders pattern is considered to be one of the most reliable patterns, usually indicating that an upward trend will soon come to an end.

Candlestick charting originated in Japan in the 1700s and was used for tracking the price of rice. It is a suitable technique for trading any liquid financial asset.

If you want to start trading AUD/USD, it is important to keep an eye on the value of coal and iron ore on the commodities market, as well as the value of other metals such as copper. This is because any fluctuation in the value of these commodities will likely cause a reciprocal fluctuation in the value of the Australian dollar relative to the US dollar.

In 2020, the top exports of Canada were Crude Petroleum ($47.2B), Cars ($31.8B), Gold ($14.4B), Vehicle Parts ($9.06B), and Sawn Wood ($7.69B). The value of the Canadian dollar is largely tied to the price of oil because the commodity is Canada’s main export. As a result, if the price of oil changes – perhaps because of a change in the Organisation of the Petroleum Exporting Countries (OPEC)production quotas – then the price of the Canadian dollar will likely be affected.