Minor Pairs

Minor pairs, also known as cross currency pairs or simply crosses, refer to currency pairs that do not include the US dollar (USD). In other words, these pairs involve two major currencies but exclude the USD as one of the currencies.

Examples of minor pairs include the Euro/British Pound (EUR/GBP), Euro/Japanese Yen (EUR/JPY), British Pound/Japanese Yen (GBP/JPY), Australian Dollar/New Zealand Dollar (AUD/NZD), and Canadian Dollar/Swiss Franc (CAD/CHF).

Trading minor pairs can offer opportunities for forex traders to diversify their portfolios and take advantage of specific currency relationships. Since these pairs do not involve the USD, their price movements are influenced by the economic and political factors of the countries whose currencies are involved in the pair.

Minor pairs can exhibit unique characteristics and price patterns that may differ from major currency pairs. For example, the EUR/GBP pair is influenced by economic data and events from both the Eurozone and the United Kingdom. Traders who have insights into the economies and monetary policies of these countries can potentially identify trading opportunities based on the relative strength or weakness of each currency.

It’s important to note that minor pairs may have lower liquidity and wider spreads compared to major currency pairs. This can make it more challenging to enter and exit trades at desired prices, and it may also increase trading costs. Traders should consider these factors and adjust their risk management strategies accordingly when trading minor pairs.

Furthermore, since minor pairs involve two major currencies, they can also be influenced by cross-currency relationships. For example, changes in the EUR/GBP pair may be influenced by developments in the EUR/USD and GBP/USD pairs. Traders should keep an eye on these intermarket relationships to gain a better understanding of potential price movements in minor pairs.

In summary, minor pairs are currency pairs that do not include the USD. They offer opportunities for traders to diversify their portfolios and take advantage of specific currency relationships. However, traders should be aware of the lower liquidity and wider spreads associated with minor pairs and adjust their trading strategies accordingly. Additionally, monitoring cross-currency relationships can provide valuable insights for trading minor pairs.