The greater volatile currencies will have their value changed over more pips compared to less volatile currencies, subsequently it is riskier to trade in highly volatile forex pairs These highly volatile currencies are greater probably to slip and make bigger moves, so it is more important to choose the proper size of the position whilst trading. The foremost currency pairs are less volatile. These pairs are EUR/USD, GBP/USD, USD/CHF and USD/JPY
Trading considering forex volatility
Traders who wish to trade in forex taking advantage of the volatility must take the following measures
– find a appropriate forex pair for trading
– analyze the fundamentals and technical aspects of the forex pair
– finalize a strategy for forex trading
– create a forex account for trading, depositing funds
– Open a position, monitor it, and close it
List of most frequent traded forex pairs with excessive volatility:
AUD (Australian dollar) /JPY(Japanese Yen): This currency pair is volatile due to the fact that the value of the AUD is inversely associated to the JPY. The price of the AUD is associated to the value of Australian exports of metals, minerals, and other items, making it a commodity currency. The Japanese currency is favored by means of investors when there are economic problems, making it a safe haven. So the value of this currency pair fluctuates rapidly depending on the outlook for the world economy.
New Zealand Dollar(NZD)/ JPY(Japanese Yen): The cost of the NZD is linked to the agricultural exports of New Zealand, making it a commodity currency like the AUD. Some of the major exports are honey, meat, eggs, and wood. Any change in the value of these commodities will affect the forex pair.
British pound(GBP) /Euro(EUR): Following the Brexit, the volatility in the pair has increased. This could reduce in future.
Canadian dollar(CAD)/ Japanese yen(JPY): The value of the CAD depends on the price of oil, making it a commodity currency, while the Japanese yen is a safe haven.
British pound(GBP) /AUD(Australian dollar): Since Australia is a member of the Commonwealth, the British and Australian economies are historically linked. The price of the AUD is closely related to the Australian export value. There has been a decrease in Australian exports to China, increasing the volatility because the United States commenced its trade warfare with China.
US dollar(USD) /South African rand (ZAR): Gold is one of the main exports from South Africa and is priced in US dollars. The volatility of this pair depends on the fee of gold, with the exchange rate increasing with a gold price increase.
USD/South Korean Won(KRW): The KRW was once formed after the second world war, and trades at 1000:1 against the US dollar.
USD/ Brazilian real(BRL): This currency pair value is often fluctuating, making it popular among day traders and other traders with a scalping strategy.
USD/Turkish Lira (TRY): After the failed coup in 2016, the Turkish Lira is extremely volatile. There are major changes in Turkish politics, society, resulting in fluctuations in currency value. Hence traders are closely monitoring the currency pair due to the uncertainty involved.
USD/Mexican peso (MXN): Due to the increase in disputes between the country, and change in tariff rate, has resulted in an increase in the volatility.