Which Forex Pair Trends the Most

<p> <br />
</p>
<div>
<p>One of the <strong>most-commonly repeated</strong> trading <strong>mantras</strong> is that the ‘<strong>trend</strong> is <strong>your friend.’</strong> <strong>I</strong> will <strong>examine</strong> why this <strong>principle </strong>is useful and what it means. I will also cover <strong>how</strong> to <strong>use</strong> a <strong>technical</strong> <strong>analysis</strong> approach for trend <strong>identification</strong>, and <strong>which</strong> are the Forex <strong>pairs </strong>that <strong>trend</strong> the most.</p>
<p>Conditions <strong>constantly fluctuate </strong>in the 24/5 <strong>Forex market</strong> and <strong>knowing</strong> when to <strong>deploy</strong> the best possible <strong>strategy</strong> on certain <strong>currency pairs</strong> will <strong>improve</strong> trading <strong>results</strong>. <strong>Learn</strong> how to <strong>spot</strong> Forex <strong>trends</strong> with our quick <strong>guide below</strong>.</p>
<section>
<h2><span> <img decoding="async" src="https://forextraderhub.com/icons/star-blue.svg" alt="brokers-we-recommend" loading="lazy" /> </span> Forex Brokers We Recommend in Your Region</h2>
<p> See full brokers list <span> <img decoding="async" src="https://forextraderhub.com/icons/arrow-slim-right.svg" alt="see-full-broker" loading="lazy" /> </span> </section>
<div>
<div>
<p><strong>Trading</strong> in the <strong>direction</strong> of the <strong>trend</strong> can <strong>minimize losses</strong>.</p>
</div>
</div>
<p><strong>Counter-trend </strong>trading is popular with seasoned <strong>traders</strong> and especially those that are <strong>classified</strong> as <strong>professional day traders</strong>. They can utilize <strong>strategies</strong> that <strong>capture</strong> price <strong>action</strong> more <strong>frequently</strong>, but it <strong>carries risk </strong>and is <strong>not</strong> ideal <strong>for 90%</strong>+ of Forex <strong>traders due to the </strong>frequent shifts in mindset it requires to be successful. Therefore, one of the <strong>first things </strong>many Forex <strong>traders </strong>do when <strong>analyzing</strong> charts is <strong>scan </strong>for <strong>trends</strong>.</p>
<div>
<div>
<p><strong>Macroeconomic</strong> trends, <strong>particularly</strong> <strong>interest rate </strong>differentials, and factors like <strong>import-export </strong>data, rank among the <strong>primary influencers </strong>for trending Forex <strong>pairs</strong>.</p>
</div>
</div>
<p>The most recent <strong>example</strong> is the monetary <strong>tightening</strong> by global <strong>central banks</strong>. After 12+ years of ultra-low monetary policy that was a <strong>response to</strong> the global financial <strong>crash in 2008 </strong>and subsequently the covid pandemic, <strong>inflation</strong> recently spiked to <strong>40+ year highs</strong>, forcing central banks to <strong>hike rates aggressively </strong>over the past <strong>12+ months</strong>. It has <strong>created</strong> new interest rate <strong>differentials</strong>, which kicked off <strong>fresh trends</strong>, something missing in many Forex pairs for some time and consequently there has been a <strong>period of readjustment</strong> in trading <strong>strategies</strong> used in the last decade that may no longer work in this <strong>new</strong> macro <strong>environment</strong>.</p>
<div><strong>Advertisement</strong></p>
<div>
<div>
<div><img decoding="async" alt="image" src="https://www.dailyforex.com/files/inl-cad-304_make_money.png" lazy="loading" class="LazyLoading" bad-src="/images/placeholder.svg" /></div>
</div>
</div>
</div>
<div>
<div>
<p>While Forex <strong>traders</strong> can <strong>use</strong> a <strong>visual analysis </strong>of any chart to <strong>spot trends</strong>, a <strong>technical</strong> analysis approach will offer a <strong>more sophisticated </strong>and <strong>accurate</strong> method of identification. <strong>A three-</strong><strong>SMA </strong>(simple moving average) filter is <strong>dependable</strong> and easy to use.</p>
</div>
</div>
<p><strong>Here is how to use the Three-SMA filter:</strong></p>
<ul>
<li>Open any chart.</li>
<li>Apply a short-term trend 9-SMA.</li>
<li>Apply a medium-term trend 20-SMA.</li>
<li>Apply a long-term trend 65-SMA.</li>
<li>If all three SMA’s trend higher, only buy based on your strategy.</li>
<li>If all three SMA’s trend lower, only sell.</li>
</ul>
<p><strong>Noteworthy:</strong></p>
<ul>
<li>The Three-SMA filter is <strong>not a trading strategy</strong> but merely <strong>a filter</strong> to identify Forex trends.</li>
<li>Price <strong>action</strong> that consistently records <strong>higher highs</strong> and <strong>higher lows </strong>is said to be in an <strong>uptrend.</strong></li>
<li>Alternatively, price action that records <strong>lower lows </strong>and lower highs is in a <strong>downtrend.</strong></li>
</ul>
<p>With <strong>100+</strong> currency <strong>pairs</strong> available, <strong>traders</strong> <strong>often </strong>use <strong>algorithmic</strong> trading <strong>solutions </strong>to <strong>cover</strong> more pairs <strong>effectively </strong>in the Forex market, but <strong>manual traders </strong>can <strong>focus</strong> on the following <strong>seven</strong> currency <strong>pairs.</strong></p>
<p><strong>The three primary trend-trading Forex pairs are:</strong></p>
<p><strong><u>EUR/USD</u></strong> &#8211; The US and the Eurozone economies present the <strong>first</strong> and <strong>third largest economies</strong> as measured by <strong>GDP</strong>, where the US currently shows better GDP data, while the <strong>Eurozone</strong> has a <strong>trade surplus </strong>with the <strong>US</strong>. The <strong>EUR/USD </strong>is also the most <strong>liquid</strong> currency <strong>pair</strong>, ripe for trend spotters to identify directional plays across all time frames.</p>
<p><strong><u>USD/JPY</u></strong> &#8211; <strong>Japan</strong> has the <strong>fourth-largest GDP</strong>-based economy and is the <strong>only</strong> G10 <strong>economy</strong> with <strong>negative</strong> interest <strong>rates</strong> while being a net-commodity importer. The Japanese <strong>Yen</strong> is also considered a <strong>safe-haven</strong> currency and the <strong>best</strong> currency for <strong>carry trading</strong> (give the interest rate differential), which can result in unique trends.</p>
<p><strong><u>GBP/USD</u></strong> &#8211; The British <strong>Pound</strong> was the <strong>global reserve currency </strong>before the US Dollar displaced it, but <strong>London</strong> remains the <strong>financial capital </strong>of the world and the most <strong>dominant Forex </strong>trading <strong>center</strong>.</p>
<p><strong>The commodity trend-trading Forex pairs are:</strong></p>
<p><strong><u>AUD/USD</u></strong> &#8211; The <strong>Australian Dollar</strong> closely <strong>follows</strong> trends in minerals <strong>commodities</strong>, especially iron ore and coal, which account for 25% of its total exports. It is also a <strong>proxy</strong> currency for the <strong>Chinese Yuan</strong>.</p>
<p><strong><u>NZD/USD</u></strong> &#8211; The <strong>New Zealand Dollar</strong> follows <strong>soft commodity trends</strong>, with New Zealand being a key exporter of milk, fruits, meat, butter, and timber.</p>
<p><strong><u>CAD/USD</u></strong> &#8211; <strong>Canada</strong> is a dominant <strong>oil</strong> and natural <strong>gas exporter</strong>, and the Canadian Dollar often follows global energy trends as a result.</p>
<p><strong>A final trend-trading currency pair with a dual punch is:</strong></p>
<p><strong><u>USD/CHF</u></strong> &#8211; As a traditional <strong>safe-haven</strong> currency with a <strong>trade surplus</strong> and an indirect commodity currency, the <strong>Swiss Franc</strong> faces influences from multiple conflicting sources.</p>
<p><strong>Many</strong> Forex traders <strong>trade directionally</strong> with a <strong>bias</strong> for the current <strong>established trend</strong> following the ‘trend is your friend principle.’ Since <strong>counter-trend</strong> trading is <strong>not ideal</strong> for <strong>90%</strong>+ of Forex traders, scanning for well-entrenched trends and using <strong>trend-following strategies </strong>makes the <strong>most sense</strong>. It will <strong>reduce losing </strong>trades, but Forex traders must <strong>monitor</strong> for trend <strong>reversals</strong> and act swiftly by adapting their approach when they suspect a trend has ended.</p>
<div>
<div>
<p>The EUR/USD, USD/JPY, GBP/USD, AUD/USD, NZD/USD, USD/CAD, and USD/CHF are currency <strong>pairs</strong> most <strong>trend trader’s favor</strong>. They often have well-established trends and <strong>deep liquidity</strong>, and every Forex broker lists them.</p>
</div>
</div>
<p><strong>What are the best pairs for trend traders?</strong></p>
<p>Since the US Dollar is part of 80% of daily Forex trading volume, either as a quote or base currency, the best currency pairs for trend traders include the EUR/USD, which is the most liquid currency pair accounting for approximately 28% of all daily trades, the USD/JPY, and the GBP/USD. The three commodity currencies, the Australian Dollar, the New Zealand Dollar, and the Canadian Dollar, also offer suitable choices for trend traders. Finally, the Swiss Franc, an indirect commodity and safe-haven currency, can provide trend trading opportunities.</p>
<p><strong>How do you find trending pairs?</strong></p>
<p>Technical analysis will help traders find currency pairs in a trend. There are several approaches, but one of the most-used ones is the Three-SMA (simple moving average) filter, as described above.</p>
<p><strong>Which Forex pairs trend the least?</strong></p>
<p>Currency crosses, currency pairs without the US Dollar as a base or quote currency, tend to trend the least. The EUR/CHF is the leading currency pair for range-bound trading.</p>
<p><strong>Which currency pair is the most liquid?</strong></p>
<p>The EUR/USD is the most liquid currency pair, resulting in the tightest spreads and the lowest trading fees.</p>
<p><strong>Which currency pair is best for beginners?</strong></p>
<p>The EUR/USD, the USD/JPY, and the GBP/USD rank among the best currency pairs for beginners, as they also trend the most. Most traders follow the trend, meaning they only buy in an uptrend and sell in a downtrend, making the three most trending currency pairs a natural choice for beginners, as counter-trend trading is an advanced and high-risk approach.</p>
<div><strong>Advertisement</strong></p>
<div>
<div>
<div><img decoding="async" alt="image" src="https://www.dailyforex.com/files/inl-cad-304_make_money.png" lazy="loading" class="LazyLoading" bad-src="/images/placeholder.svg" /></div>
</div>
</div>
</div>
</div>
<p><br />
<br /><a href="https://www.dailyforex.com/forex-articles/forex-pairs/197426">Source link </a></p><p>The post <a href="https://forextraderhub.com/which-forex-pair-trends-the-most.html">Which Forex Pair Trends the Most</a> first appeared on <a href="https://forextraderhub.com">Forex Trader Hub</a>.</p>