Minor Pairs In Forex: Definition, The Impact, Factors That Affect and How to Trade

Minor pairs in forex, which do not involve the US Dollar, provide unique insights into the economic relationship between two countries that do not use the US Dollar. These currency pairs can often experience greater volatility and more complex market dynamics, but they also present unique opportunities for traders.

These currency pairs are not as widely traded as major currency pairs, but they still play an important role in the global forex market. In this article, we will learn what minor currency pairs in forex are, how they affect the forex market, the factors that affect them, and effective strategies for trading them.

What Are Minor Pairs in Forex?

Minor pairs in FOREX89, also known as cross-currency pairs, are currency pairs that consist of two currencies, neither of which is the US Dollar. Unlike the major pairs, such as EUR/USD, GBP/USD, or USD/JPY, which include the USD as one of the currencies, minor pairs involve currencies like the Euro (EUR), the British Pound (GBP), the Japanese Yen (JPY), and others.

Examples of minor pairs include:

EUR/GBP (Euro/British Pound)

EUR/JPY (Euro/Japanese Yen)

GBP/JPY (British Pound/Japanese Yen)

AUD/NZD (Australian Dollar/New Zealand Dollar)

CHF/JPY (Swiss Franc/Japanese Yen)

These pairs tend to have lower liquidity compared to the major pairs, and their trading volumes are typically smaller. However, they still provide forex trading opportunities for traders to profit from currency price movements. Many traders on platforms like XM Forex also trade commodities such as XAG/USD alongside minor pairs, as silver prices can be influenced by similar economic and geopolitical factors.

If you are wondering which minor currency pairs are best to trade, you can refer to the suggestions below.

Best Minor Pairs to Trade in Forex Trading

The best minor pairs to trade depend on your trading style, risk tolerance, and market analysis. Some minor pairs that are more liquid and widely traded include:

EUR/GBP

EUR/JPY

GBP/JPY

AUD/NZD

CHF/JPY

These pairs tend to offer relatively stable price movements and provide various forex trading opportunities for both short-term and long-term traders. Similarly, traders at XM Forex often analyze XAG/USD alongside minor pairs, as silver’s price movements can offer additional diversification and hedge against currency fluctuations.

In general, although minor currency pairs are less traded, they still play an important role in the forex trading market. Let’s explore this in detail in the following sections.

The Impact of Minor Pairs in Forex Trading on the Financial Market

Both major and minor pairs in forex trading play distinct roles in the market, and the impact of minor currency pairs can be observed in several ways:

Economic Events: Events such as interest rate decisions, GDP reports, inflation data, and geopolitical events in the countries of the respective currencies can cause sharp price movements in minor pairs. Similarly, these economic factors also influence XAG/USD, as silver prices tend to rise during periods of economic uncertainty or inflation.

Market Sentiment: The sentiment towards the respective economies can lead to volatility in these pairs. If traders feel that the European economy is performing better than the UK economy, they might favor the Euro over the Pound, causing a rise in EUR/GBP. Market sentiment also plays a crucial role in XAG/USD, as silver often benefits from increased demand during times of global financial instability.

Risk Diversification: Trading minor pairs allows investors to diversify their currency portfolios beyond the major pairs, which can reduce overall risk exposure. Many traders at XM Forex use XAG/USD as part of their diversification strategies, as silver offers an alternative asset class that moves differently from traditional forex pairs.

After understanding the role of minor currency pairs in the forex trading market, it is important to examine the factors that influence their price movements and overall behavior.

While minor pairs in forex are not as popular as the major pairs, they still provide traders with a unique set of opportunities. By understanding the factors that influence minor pairs and applying effective trading strategies, you can tap into this segment of the forex market and diversify your trading portfolio. In the next article, readers can learn more about minor pairs in forex