The three essential currency pairs to master: A practical guide for intraday traders

In the forex market, choosing the right currency pairs is the foundation of successful trading. Instead of passively accepting the market, intraday traders need to proactively understand the characteristics, liquidity, and volatility patterns of each currency pair. This article will analyze the top three currency pair combinations worth paying attention to.

Market Landscape: Why These Three Currency Pairs Dominate

The trading volume distribution of currency pairs is highly uneven. According to 2022 data, the most active trading instruments in the global forex market are concentrated in dollar-related pairs. This concentration offers opportunities for intraday traders—high liquidity means lower spread costs and faster execution.

Each currency pair consists of a base currency (left) and a quote currency (right). The quote reflects the amount of quote currency needed to purchase one unit of the base currency. Understanding this structure is essential for developing effective trading strategies.

EUR/USD: The Most Active Currency Pair Globally

EUR/USD accounts for 22.7% of the global forex trading market share, unquestionably becoming the most liquid currency pair. This pair involves the Eurozone and the United States, two major economies, and its stability and trading opportunities attract investors worldwide.

This currency pair has distinct features: tight spreads, ample liquidity, and relatively moderate volatility but abundant opportunities. It has a negative correlation with USD/CHF and a positive correlation with GBP/USD, allowing traders to verify trading signals by observing related pairs. Intraday traders should closely monitor policy movements from the European Central Bank and the Federal Reserve, as interest rate changes directly influence this currency pair’s trend.

USD/JPY: A Geopolitically Sensitive Trading Instrument

USD/JPY accounts for 13.5% of the market share and is the second most active currency pair. Compared to EUR/USD, this pair reacts more sensitively to geopolitical events and central bank policy adjustments.

The Bank of Japan’s interest rate decisions often trigger sharp fluctuations in USD/JPY in the short term. This pair shows a positive correlation with USD/CAD and USD/CHF, meaning traders can verify the strength of the dollar trend across multiple pairs. For intraday traders, it’s crucial to track signals from the Bank of Japan and economic data releases, as well as changes in US economic indicators.

GBP/USD: A High-Volatility, High-Reward Choice

Although GBP/USD accounts for only 9.5% of the market share, it is favored by intraday traders due to its higher volatility. This pair reflects the economic strength comparison between the UK and the US, with price swings generally larger than EUR/USD.

GBP/USD has a positive correlation with EUR/USD and a negative correlation with USD/CHF. Traders should be aware that UK economic data releases, Bank of England policy adjustments, and Brexit-related policy developments can significantly impact this currency pair.

The Dominance of the US Dollar in Currency Pairs

The frequent appearance of the US dollar in major currency pairs is fundamentally due to the size and political stability of the US economy. As the global reserve currency, every appreciation or depreciation of the dollar affects a wide range of currency combinations.

Practical Tips for Intraday Traders

Successfully trading these currency pairs requires attention to multiple dimensions: trade flows often lead currency movements, interest rate fluctuations directly alter spot prices, economic uncertainties trigger risk appetite shifts, and geopolitical conflicts can cause sudden shocks.

Intraday traders should avoid blindly following any currency pair and instead make choices based on their risk tolerance, trading timeframes, and technical analysis skills. Staying informed about the global economic calendar, central bank statements, and political events is key to success. Trading liquidity-rich currency pairs can reduce slippage risk, but higher volatility also means greater potential losses—risk management should always come first.