Best Currency Pairs To Trade & Most Volatile Forex Pairs 15 Major Forex Pairs List

An increase in volatility can be caused by the publication of economic indicators or other news related to the currency. Approximately $5 trillion worth of forex transactions take place on a daily basis, an average of $220 billion per hour. The market is largely made up of institutions, corporations, governments, and currency speculators.

Furthermore, turbulent market conditions lead to increased liquidity, which allows deals to close quickly at favorable rates. Nevertheless, it is important not to overlook the risks posed by volatility; fluctuations may also result in losses if proper risk management techniques are not employed. How do you determine which currencies are the most volatile and the least volatile? Various studies have been done to compare the price ranges of several currency pairs over several years, and these ranges were broken down into the average price ranges per day. Pairs like EUR/USD and GBP/ USD are major currency pairs because the currency these pairs contain is that of renowned economies. Therefore, an influx of large amounts of liquidity because of the large participant trading these pairs they aren’t volatile; more predictable.

For example, an unexpected surge in inflation, as indicated by a report, may prompt central banks to consider an imminent increase in interest rates, eliciting swift reactions from the Forex market. Foreign exchange (FX) volatility is heavily impacted by economic indicators, which serve as pivotal variables in assessing a country’s financial health. These measures encompass key figures such as GDP growth, unemployment, inflation, and retail sales data.

1. For this list, we will be analyzing US dollar pairs as it is the world’s most traded currency and most liquid.
2. GBP/JPY accounted for about 4% of the daily forex trading volume in 2023.
3. While EUR/USD boasts the most trading volume by far, these three commodity currency major pairs, AUD/USD, CAD/USD and NZD/USD are the most volatile major pairs and as such received a lot of interest.
4. Similarly, volatility can also change intraday depending on which markets are open.
5. The pair’s liquidity and narrow spreads make scalping and day trading popular for exploiting volatility triggered by breaking news.

In addition, socio-political issues and credit ratings from foreign organizations can contribute significantly to fluctuations in value. With Cable’s inclination for price gaps, swing trading offers an effective means of benefiting from extended upward or downward movements over several days. The Lira’s value in relation to the US dollar exhibits significant instability, largely stemming from Turkey’s economic policies, political uncertainty, and susceptibility to external debt problems. Generally, major and exotic currencies are the most susceptible to high uncertainty due to economic disparities, political instability, or significant trade relationships that can affect them significantly. We recommend that you seek independent financial advice and ensure you fully understand the risks involved before trading. The table shows that today the most volatile Forex pairs are exotic, namely, USD/SEK, USD/TRY, and USD/BRL.

Traders should regularly monitor volatility levels and adjust their trading strategies accordingly. Majors are forex pairs including the US dollar and six other currencies which make up the vast majority of traded pairs. While EUR/USD boasts the most trading volume by far, these three commodity currency major pairs, AUD/USD, CAD/USD and NZD/USD are the most volatile major pairs and as such received a lot of interest. Preparedness also involves maintaining a disciplined trading approach and adhering to well-defined risk management strategies.

The frequent and rapid changes occurring amongst volatile pairings can offer valuable profit potential in bullish and bearish markets. Proficient traders employ specific strategies to withstand unforeseeable currency fluctuations while aiming to leverage volatility and safeguard their investments from unstable market conditions. Geopolitical events, economic data, and sentiment influence forex volatility, resulting in an intricate tapestry reflecting the global financial status quo. Of course, we won’t discourage you from trading the low liquidity currency pairs. However, our task is to warn inexperienced traders and newbies that the risk of such trading is higher than that of trading the classic currency pairs.

Additionally, news trading techniques are widely employed whereby traders position themselves before or following significant news disclosures. Fluctuations in interest rates, political uncertainty, and alterations in trading relationships can all result in significant price fluctuations. To effectively trade USD/TRY, one must comprehensively comprehend Turkey’s geopolitical developments and macroeconomic factors.

Why Volatility Matters

The USD/MXN pair shows the exchange rate between the US dollar and the Mexican peso. Mexico exports oil and gas, cars, electrical equipment, copper and gold. As oil accounts for almost 4% of total exports, its price influences the value of the peso. The degree of volatility shows the state of the market at different points in time. If there is a significant rise in interest from bulls or bears, volatility rises. •  Any type of release of data can impact the volatility of currency pairs.

1. With the current president Lula da Silva, previously convicted of money laundering, Brazil also faces economic challenges, so volatility in the USD/BRL pair is likely to continue.
2. So below, we’ve handpicked FX pairs of majors, minors and exotics that generally display high volatility.
3. The most volatile currency pairs offer enticing prospects for profit because their price movements can be more dramatic than less volatile pairs.
4. Geopolitical events refer to the actions taken by governments in response to certain factors or currencies.
5. Top New Zealand exports include dairy, eggs, meat, wood, and honey and as a result, any changes in the price of any of these markets will affect NZD’s value against the Japanese yen.
6. This trend is primarily driven by differences in monetary policy approaches.
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The top 10 most volatile currency pairs in 2023

The euro has seen lower volatility in recent years, with an average of 6.6% against the US dollar. EUR/USD has lost around 10% of its value and even hit parity in 2022 but has not experienced large short-term price movements throughout. The South African rand has been highly volatile in recent years, with an average volatility of nearly 13% over the last three years. It has also experienced significant price swings, losing more than 20% against the US dollar with a high-to-low range of almost 50%. The first volatile currency pair on our list is AUD/JPY, which represents a pairing of the Australian dollar against the Japanese yen.

However, such high volatility results from low liquidity, and trading the low liquidity currency pairs carries particular risks for a trader. Traders should be mindful of currency correlations when analyzing and trading multiple currency pairs simultaneously. Understanding how currencies influence each other can help traders manage risk effectively by avoiding excessive exposure to correlated pairs. By diversifying their currency trades with pairs that have low or negative correlations, traders can reduce overall portfolio risk and enhance their trading strategies. Risk management principles for trading the least volatile currency pairs follow the normal risk management patterns that have been described in many articles on this site. In summary, here are the ways to apply risk management when trading the least volatile pairs.

Which currency has the highest volatility?

We have generated over millions of dollars via trading with the 5 part system outlined in this free training. Download it now before this page comes down or when I decide to stop mentoring. In a roundabout way, worsening trade relations between the US and China affect both most volatile currency pairs Britain and Australia. As AUS becomes more volatile when China’s economy struggles, the pound strengthens in correlation to USD stability.

Volatility often increases during key trading sessions when volume skyrockets. The London-New York overlap sees peak volatility as both centers are online. Exotic pairs only have a few people trading them, leading to highly volatile conditions. The volatility of a currency pair is a measure of how frequently the price of this pair changes. A pair that changes price rapidly has high volatility, while a currency pair that does not fluctuate aggressively is not. The USD/CHF, an alternative name for this pair, is “the Swissie.” This pair contains the US dollar against the Swiss Franc.

Instead of setting a stop loss, you can set a trade on the same currency pair to trigger in the opposite direction if the original trade has moved against your position by a fixed number of pips. That way, you prevent losses from exploding and can actually maneuver both trades to your benefit. Inflation is the benchmark commonly used by central banks to make interest rate adjustments. Whenever the world is in an atmosphere of central bank rate adjustments, inflation data become one of the main drivers of currency pair volatility. The key inflation data are usually the Consumer Price Index, Producer Price Index, and the various average earnings indices across several countries, which measure wage inflation.

Dealing with volatile forex pairings becomes challenging due to the hurdles caused by market uncertainties. Momentum indicators such as the Relative Strength Index (RSI) and Stochastic Oscillator are commonly utilized by traders to determine whether markets are losing momentum or gaining strength. The “Cable,” which refers to the GBP/USD pair, experiences high levels of volatility due to various factors such as UK economic policy, developments related to Brexit, and changes in the US economy. However, due to the potential for considerable price variations, strict attention to risk management is crucial; this encompasses implementing stop-loss orders in trading techniques. The pair’s liquidity and narrow spreads make scalping and day trading popular for exploiting volatility triggered by breaking news. This is because the psychology of the market behavior in its most liquid form makes up the backbone of technical analysis.