Forex currencies are the most popular financial asset traded in the binary options market. Traders love them because of their volatility and liquidity. They are also available for trading around the clock. Different currency pairs have different characteristics that traders ought to understand before trading them. In order to trade binary options currency pairs, a trader can simply sign up with a reliable and reputable broker, such as Option.FM, and make their trade.
Here are some of the popular forex pairs traded in the binary options market as well as their unique characteristics:
Among the major currency pairs, the EURUSD is the most popularly traded. It is also the most liquid and the most volatile. This is because the pair is made up of two of the most widely used currencies in the world; the euro and the US dollar. The euro is the official currency of the Eurozone whereas the US dollar is the official currency of the United States of America. These two currencies are the most actively used in the world economy.
Factors that Influence the EURUSD
The price of the EURUSD is usually affected by economic data as well as the policies of both the Eurozone and the United States. Announcements from both the European Central Bank (ECB) and the U.S. Federal Reserve Bank should be followed keenly by traders as they usually help traders understand the policy standing of both parties.
Political stability in the Eurozone also affects the value of this pair, as recent developments in Greece and their debt crisis have shown. The Eurozone is made up of 28 countries and 19 of them use the euro as the official currency. It is therefore important to be updated on what is happening on the major economies of the bloc in order to trade accurately.
The Best Time to Trade the EURUSD
Because of its liquidity, the EURUSD can be traded at any time, as long as the market is open. However, the best time to trade this pair is between 1200hrs-1600hrs, when both the New York and London markets are open. This is when the most activity on this currency pair occurs.
The USDJPY is the second most traded forex pair. The Japanese yen has had a complicated political history and for years, it served as the bridge between Asia and the rest of the world. However, with the emergence China and other countries such as Singapore, its significance has continued to wane. Nonetheless, Japan continues to be a major player in the global markets with its status as one of the largest exporters of manufactured and industrial goods.
What Drives the USDJPY?
The USDJPY is mostly driven by the economic policy announcements of the US and Japan. The Bank of Japan (BOJ) especially plays an active role in controlling the value of the yen. To support its exports, the BOJ continues to lobby strongly to lower the value of the yen and to boost the value of the dollar. Traders should therefore keenly monitor BOJ announcements because they tend to spur significant volatility in this pair. Traders should also pay attention to manufacturing or industrial data which also impact price movement of the currency pair.
The Best Time to Trade the USDJPY
The USDJPY enjoys volatility around the clock. It can be traded during the whole of the New York trading session (1300hrs-2300hrs GMT). However, economic data relating to the yen is usually released when the Tokyo market is open (0000hrs-0900hrs GMT) so make sure to watch out for this information also.In addition, Option.FM provides their traders daily market news and this is an excellent way to keep updated with the latest financial news.
The GBPUSD is the third most traded currency pair and it is particularly loved because of its volatility. Due to demographic reasons, the GBPUSD shares a positive correlation with the EURUSD. The Bank of England (BoE)has a lesser influence than the US Federal Bank but it still has a major impact on the value of the GBPUSD.
What Drives the GBPUSD?
The UK economy is mainly influenced by consumer spending. Traders, therefore, need to keenly follow economic reports such as employment reports, retail sales as well as housing sales data. This information can be found on an Economic Calendar.
The Best Time to Trade GBPUSD
Like the EURUSD, the ideal time to trade the GBPUSD is between 1200hrs-1600hrs when both the New York and London markets are open.
The AUDUSD is the fourth most traded forex pair in the market. Australia is one of world’s largest exporters of gold and the major trading partners of China. The Reserve Bank of Australia (RBA) has always enforced regulation periodically to ensure that the value of the Australian dollar is weakened so that the country’s exports can perform well globally.
Factors that Influence the AUDUSD
The main factor that affects this currency pair is the Chinese economy. China is a major trading partner of Australia. The growth of the Australian economy can greatly be attributed to the high demand of mining as well as agricultural products from China. Economic data from China, such as GDP figures and manufacturing projections, usually have a significant impact on the value of the AUDUSD.
The RBA and US Federal Bank are also major players in the value of this pair. These two Central Banks usually have divergent policies. Generally, the Federal Bank favors a stronger US dollar whereas the RBA favors a weaker Australian dollar. Traders need to watch statements from these two institutions for clues on the direction of the AUDUSD.
The Best time to Trade the AUDUSD
The AUDUSD has smooth price action and decent volatility throughout. The pair can be traded in both the New York and Tokyo market. The New York market is open between 1300hrs-2300hrs GMT whereas the Tokyo market is open between 0000hrs-0900hrs GMT.
Currency pairs are widely traded because they guarantee volatility and liquidity at all times. Understanding the unique characteristics of individual currencies can help traders trade the popular forex pairs effectively and profitably.