Best Currency Pairs to Trade in 2024 - Admiral Markets
The forex market is one of the most liquid and fast-moving financial markets globally, offering numerous currency pairs for traders to choose from. Selecting the right currency pairs is critical to success in forex trading, as it determines the level of volatility, liquidity, and profitability potential. In 2024, several major economic events and geopolitical factors are expected to influence currency markets. This article will explore the best currency pairs to trade in 2024, highlighting their unique characteristics and how traders can capitalize on their movements.
1. EUR/USD (Euro/US Dollar)
The EUR/USD pair is the most traded currency pair in the world, accounting for more than 20% of global forex trading volume. This pair is a favorite among traders due to its high liquidity, tight spreads, and frequent price movements. In 2024, the pair is expected to remain in the spotlight due to ongoing economic developments in the Eurozone and the U.S.
Why Trade EUR/USD?
High Liquidity: This ensures tight spreads and lower trading costs.
Influenced by Major Economic Data: Economic reports such as U.S. inflation data, European Central Bank (ECB) policy, and employment figures drive significant price movements.
Steady Volatility: EUR/USD experiences steady volatility, making it suitable for both short-term and long-term traders.
Example:
In 2023, traders who followed the Federal Reserve’s interest rate hikes saw the U.S. dollar strengthen against the euro, resulting in profitable opportunities for those shorting EUR/USD. In 2024, similar monetary policies could influence the pair’s direction.
2. GBP/USD (British Pound/US Dollar)
GBP/USD, also known as "Cable," is a highly volatile currency pair, often reacting sharply to UK political events, central bank decisions, and U.S. economic data. With the Bank of England’s interest rate policies and post-Brexit economic adjustments, GBP/USD offers ample trading opportunities.
Why Trade GBP/USD?
High Volatility: Traders can capitalize on sharp price swings.
UK Economic Influence: The pair is sensitive to changes in UK monetary policy, inflation reports, and political developments.
U.S. Dollar Influence: As one of the world's reserve currencies, the USD adds another layer of influence on the pair’s movements.
Example:
In 2024, with potential changes in the Bank of England's monetary policy and U.S. economic conditions, GBP/USD is expected to continue offering both risk and reward opportunities for experienced traders.
3. USD/JPY (US Dollar/Japanese Yen)
The USD/JPY currency pair is often viewed as a "safe-haven" pair due to the yen’s status as a haven currency in times of market uncertainty. Movements in this pair are heavily influenced by U.S. economic policy and global risk sentiment. In 2024, with possible geopolitical tensions and fluctuating risk appetites, USD/JPY could see heightened activity.
Why Trade USD/JPY?
Interest Rate Differentials: The difference in U.S. and Japanese interest rates often drives significant movements.
Safe-Haven Dynamics: The yen strengthens during times of economic or political instability, making USD/JPY an attractive option for traders who follow global sentiment.
Strong Correlation with Bond Yields: USD/JPY is influenced by U.S. Treasury yields, providing insights for trading strategies.
Case Study:
In 2023, traders who shorted USD/JPY during periods of heightened global uncertainty, such as geopolitical tensions, benefited from the yen’s strength. A similar dynamic could play out in 2024.
4. AUD/USD (Australian Dollar/US Dollar)
The AUD/USD currency pair is highly correlated with commodity prices, particularly gold and iron ore, as Australia is a major exporter of these resources. This pair is influenced by both global commodity demand and U.S. monetary policy, making it an ideal option for traders who follow commodity markets.
Why Trade AUD/USD?
Commodity Influence: Movements in commodity prices, especially gold, directly affect the value of the Australian dollar.
Risk Sentiment: The Australian dollar is often considered a “risk-on” currency, making it sensitive to global risk sentiment.
Global Trade Relations: China’s demand for Australian exports significantly impacts AUD/USD, as China is Australia’s largest trading partner.
Example:
In 2023, rising commodity prices boosted the AUD/USD pair, especially during the recovery of global trade. Traders capitalizing on this correlation could find similar opportunities in 2024.
5. USD/CAD (US Dollar/Canadian Dollar)
The USD/CAD currency pair is another commodity-driven pair, with the Canadian dollar being highly correlated with oil prices due to Canada's significant oil exports. In 2024, fluctuations in oil demand and supply are expected to impact USD/CAD, making it a strong candidate for traders interested in commodities and macroeconomic factors.
Why Trade USD/CAD?
Oil Price Sensitivity: Oil prices are a key driver of CAD movements. When oil prices rise, the Canadian dollar tends to strengthen, and vice versa.
Stable Economic Conditions: Both Canada and the U.S. offer stable economic environments, providing more predictable trading patterns.
Energy Market Volatility: Changes in global energy supply and demand will likely impact the pair’s price action in 2024.
6. EUR/GBP (Euro/British Pound)
EUR/GBP is a popular cross-currency pair that reflects the economic relationship between the Eurozone and the UK. With Brexit impacts continuing to unfold and divergent monetary policies between the Bank of England and the European Central Bank, EUR/GBP offers traders an opportunity to profit from regional economic events.
Why Trade EUR/GBP?
Brexit Impact: Ongoing adjustments in trade agreements between the UK and the EU keep the pair volatile.
Monetary Policy Divergence: Differing central bank policies between the ECB and the BOE provide opportunities for traders.
Reduced Exposure to USD: As a cross-pair, EUR/GBP avoids direct exposure to U.S. dollar movements, making it a good option for diversifying trades.
7. NZD/USD (New Zealand Dollar/US Dollar)
NZD/USD shares similarities with AUD/USD, given New Zealand’s reliance on agricultural exports. The pair is often impacted by changes in global trade, risk sentiment, and U.S. economic data.
Why Trade NZD/USD?
Agricultural Exports: New Zealand’s economy relies heavily on exports of dairy, meat, and other agricultural products, which influence the currency’s value.
Global Risk Sentiment: Like the Australian dollar, the New Zealand dollar performs well when global markets are optimistic.
8. EUR/JPY (Euro/Japanese Yen)
EUR/JPY is another cross-currency pair that combines the volatility of the euro with the safe-haven appeal of the yen. It offers an exciting opportunity for traders who follow European economic developments and global risk sentiment.
Why Trade EUR/JPY?
Volatility: The pair’s volatility offers traders frequent trading opportunities.
Risk-On/Risk-Off Dynamics: The yen’s safe-haven status and the euro’s exposure to risk create contrasting influences, making EUR/JPY ideal for traders who follow risk sentiment shifts.
9. GBP/JPY (British Pound/Japanese Yen)
Known for its high volatility, GBP/JPY provides numerous opportunities for short-term traders. This pair is sensitive to UK economic data, Japanese monetary policy, and global geopolitical events.
Why Trade GBP/JPY?
High Volatility: Traders looking for fast-paced markets will find GBP/JPY particularly attractive.
Geopolitical Sensitivity: The pair’s movements are often driven by macroeconomic and political factors, offering frequent trading opportunities.
10. USD/CHF (US Dollar/Swiss Franc)
The USD/CHF currency pair is often viewed as a safe haven, similar to USD/JPY. Switzerland’s political neutrality and strong financial sector support the franc’s appeal as a safe-haven currency during times of global market uncertainty.
Why Trade USD/CHF?
Safe-Haven Appeal: USD/CHF performs well in times of market instability, making it ideal for risk-averse traders.
Interest Rate Differentials: The pair is influenced by U.S. and Swiss interest rate policies, providing steady trading opportunities.
Conclusion
In 2024, the forex market will continue to offer a wealth of opportunities for traders who know which currency pairs to focus on. EUR/USD, GBP/USD, and USD/JPY will remain key pairs due to their liquidity and the influence of major economic events. Meanwhile, pairs like AUD/USD and USD/CAD will offer opportunities for traders who track commodities. Whether you're a short-term or long-term trader, understanding the unique dynamics of each currency pair will be essential to navigating the forex market successfully in the coming year.
