Major currency pairs such as EUR/USD, GBP/USD and USD/JPY dominate forex markets with high liquidity and trading volumes yet traders can explore alternative opportunities through lesser known minor currency pairs.
This guide explores minor currency pairs and explains their differences from major pairs while demonstrating how they can benefit your forex trading approach.
The forex market stands as the world's biggest financial market with unmatched liquidity. As a forex trader you can engage in daily trading with hundreds of various currency pairs. Forex currency pairs exhibit varying characteristics and values.
What are Minor Currency Pairs in Forex?
A minor currency pair consists of any two currencies where the US dollar (USD) is not included. The currencies that constitute minor pairs exhibit lower levels of liquidity and volatility when compared to major currency pairs. Research-driven traders can find great trading opportunities through minor currency pairs.
Jetonbank uses cutting-edge technology to provide traders with a digital banking platform that offers access to more than 50 global currency pairs.
Our platform allows you to open and fund a forex trading account so you can immediately start trading major pairs like EUR/USD or minor pairs.
How Do Minor Currency Pairs Differ from Major Currency Pairs in Forex?
Traders should understand several important distinctions that exist between major and minor currency pairs.
Trading Volume
The major currency pairs such as EUR/USD experience billions of dollars traded each day among participants. Minor currency pairs display lower daily trading activity than major pairs with volumes that can be as much as ten times smaller. This can impact spreads and liquidity.
Price Fluctuations
Major currency pairs experience broader price movements during market hours as they receive extensive trading activity across the globe. On average minor currency pairs experience daily trading ranges between 30 and 50 pips which are relatively narrow. This impacts strategy.
News Impact
Economic announcements from nations that issue major world currencies like the US, Europe, and Japan cause significant market reactions in currency pairs connected to those countries. Single country news affects major currency pairs more than minor currency pairs which react predominantly to regional economic conditions.
Broker Support
While all top forex brokers provide trading options for major currency pairs their support for certain minor currency pairs differs. Confirm your broker provides the necessary currency pairs before starting your trading strategy.
Recognizing these fundamental distinctions enables traders to effectively integrate minor currency pairs into their comprehensive forex trading strategy. We will now examine specific examples of minor currency pairs in trading.
What are Some Examples of Minor Currency Pairs in Forex Trading?
These currency pairs represent the most frequently traded minor pairs currently active in the forex market.
This forex pair consists of the US dollar trading opposite the Canadian dollar. The USD/CAD currency pair experiences high trading volume because of the commercial exchanges between North America's United States and Canada.
- EUR/GBP - The euro and British pound sterling. Price movement across currency markets is directly affected by the economic and political connections between European nations and the United Kingdom.
- AUD/JPY - This currency pair reflects the exchange rate between the Australian dollar and the Japanese yen. This currency pair serves as an indicator for commodity demand levels and risk-taking sentiment among traders.
- NZD/USD - The US dollar serves as a counterpart to the New Zealand dollar. Commodity pricing of dairy products and timber plays a role in influencing this currency pair.
- GBP/CHF represents a currency pair between the British pound sterling and the Swiss franc. Safe-haven trading flows and shifts in risk sentiment influence this European cross-currency pairing.
- USD/MXN - US dollar and Mexican peso. The USD/MXN pair receives attentive observation from traders because of NAFTA trade developments and Mexico’s export activities.
- EUR/NOK - Euro and Norwegian krone. Price movements in currency pairs result from changes in energy costs combined with European economic performance data.
- EUR/SEK - Euro versus the Swedish krona. This cross-pair between the Euro and the Swedish krona experiences price movements due to Scandinavian risk trades together with various European data points.
Minor currency pairs offer traders a way to access various regions and asset classes outside of major currency markets.
Market behavior analysis benefits from the diverse dynamics which these trading pairs present.
Why Should Traders Pay Attention to Minor Currency Pairs in Forex?
Minor currency pairs typically have less liquidity compared to major pairs yet savvy traders still dedicate attention to these pairs because they offer valuable trading benefits.
- Trading Opportunities: Minor currency pairs tend to show more dramatic short-term price changes because fewer traders participate in their markets. The situation presents chances for traders to execute timely entry and exit trades.
- Diversification: Allocating minor currency pairs to your forex portfolio enables you to achieve better currency exposure diversification beyond major currency pairs. The approach minimizes dependence on the economic performance of any one nation.
- News Impact Differentials: The reduced response of minor pairs to major country data helps detect divergence movements away from broad market trends. Such dislocations offer trading setups.
- Pair Correlations: The price movements of minor pairs do not consistently show strong correlations with major pairs during intraday trading. High volatility periods can reveal unique price action opportunities in minor pairs which major pairs often overlook.
- Regional Expertise: By understanding the detailed economic interactions between minor pair countries traders can gain an advantage in predicting unique catalysts that affect these pairings.
- Potentially Better Risk/Reward: With more contained daily trading ranges, well-located trades on minor pairs may allow achieving risk-defined profit targets with less volatility than scaling into major pairs.
Minor currency pairs demand increased understanding but are essential components for experienced forex traders' comprehensive market strategies and tools.
Minor currency pairs possess distinct qualities which when utilized properly can work in tandem with major pair trading strategies.
Can Minor Currency Pairs Offer Better Trading Opportunities in Forex?
Minor currency pairs deliver superior trading opportunities compared to major currency pairs when traders master their execution techniques.
But there are some important considerations:
News Impact is Diffused
Price action in minor currency pairs tends to follow technical patterns due to the absence of any one major macroeconomic catalyst. The spread of news impact enables technical setups to unfold across extended time periods.
Reduced Crowds
Reduced participation means that crowd behavior distortions remain minimal during extreme events in minor currency pairs. Herd emotions do not affect minor pair prices to a significant extent.
Shallower Liquidity
Minor currency pairs provide enough liquidity for retail traders but cannot support the high-volume trading needs of large institutions. Medium and large trades have less impact on the order book balance.
Fewer Macro Surprises
Minor pairs show less sensitivity to individual major data releases which enables traders to forecast technical or regional trends before news releases.
Pair-Specific Expertise Matters
Traders who understand the economic connections between specific minor pair countries can benefit by exploiting market nuances that most overlook.
The downside is that trading these pairs comes with the possibility of wider spreads and decreased participation when liquidity is very low. Minor currency pairs present valuable trading opportunities for those who research the market thoroughly.
Through its web-based and mobile trading platforms Jetonbank provides traders with straightforward access to both major and minor currency pairs that feature narrow spreads.
Traders are able to open a forex account at Jetonbank to trade minor currency pairs together with major pairs from any location globally.
How Do the Spreads for Minor Currency Pairs Compare to Major Currency Pairs?
The spread is a key factor that traders must examine when selecting currency pairs for forex trading. The spread represents the price difference between the buying (bid) price and selling (ask) price that forex brokers provide to traders.
Major currency pairs usually feature narrower spreads compared to minor pairs because their trading volumes are significantly greater. The spreads between major and minor currency pairs do not typically show dramatic differences.
At Jetonbank traders notice EUR/USD spreads to average 1 pip while minor pairs such as AUD/CAD or NZD/CHF maintain spreads between 2 and 3 pips.
Trading minor currency pairs results in a slightly increased cost per unit of currency exchanged. Traders can generate profits from minor currency movements by strategically implementing limits and stops.
The greater volatility associated with minor currency pairs functions to balance out the slightly wider spreads which we will cover in the following discussion.
The spread size should not dissuade traders from exploring minor currency pairs in forex markets. Traders can access competitive spreads for both major and minor currency pairs through brokerage services offered by Jetonbank.
The trading opportunities available often surpass the minimal spread cost differences.
Are Minor Currency Pairs More Volatile Than Major Currency Pairs in Forex?
The main benefit of minor currency pairs lies in their greater volatility when compared to major currency pairs.
The price of these currency pairs moves significantly over time which generates substantial short-term trading possibilities.
Minor pairs show increased volatility for multiple reasons.
- Lower liquidity: Minor currency pairs experience bigger price shifts due to less frequent trading compared to major pairs when exposed to minor news events or trader interest. Liquidity drying up temporarily can spark volatility.
- Sensitivity to economic factors: The economic connections and currency relationships of minor pairs show stronger ties to particular commodity prices and trade patterns along with domestic financial circumstances. Prices show substantial movements when the foundational influences undergo small modifications.
- Thinner order books: The order books of brokers display fewer buy and sell orders across various price levels when it comes to minor currency pairs. Large trades can easily move prices up or down because of the limited number of orders at various price levels.
- News impact: Major economic releases can cause little movement in EUR/USD but result in significant price jumps for currencies like the Australian or New Zealand dollar.
Minor currency pairs typically show more intraday and monthly fluctuations because major traders often ignore them.
The increased volatility from minor currency pairs presents advantageous trading conditions for both range trading and breakouts.
What are the Advantages of Trading Minor Currency Pairs in Forex?
Having explained the nature and behavior of minor currency pairs we can now examine their main benefits for forex traders.
- Minor pairs tend to show greater price movement potential because they experience higher volatility levels which result from different economic factors and liquidity conditions. The higher likelihood of profitable trading opportunities emerges from both breakouts and tighter price ranges.
- Trading volumes are less dense on minor pairs which results in thinner order books that make it easier for individual traders to impact prices more significantly. Market participation from other traders will be reduced in minor pairs.
- Investing in minor pairs enables traders to expand their currency exposure beyond major currencies such as USD, EUR, GBP, and JPY. Portfolio risk decreases when sharp movements occur in a major currency because the investment holds multiple currency pairs.
- Traders who research smaller economies and consistently monitor relevant news from these markets have the potential to identify technical patterns and fundamental opportunities before other market participants do.
- Major news events can trigger stop runs and liquidity gaps because traders converge on the same direction at once. Traders find minor currency pairs appealing because they typically experience less market congestion.
Forex traders can benefit from adding minor currency pairs to their portfolios because they provide increased volatility and thinner order books along with information advantages and better diversification compared to major pairs.
How Do You Analyze Minor Currency Pairs for Forex Trading?
Given our understanding of the benefits of trading minor currency pairs we should now explore methods for evaluating them for trading opportunities.
The fundamental analysis techniques used for major currency pairs remain applicable to minor pairs even though specific adjustments need to be implemented because of their distinct characteristics.
- Investigate economic fundamentals to understand important data releases and events that influence each currency of the pair. Identify the principal driving forces behind currency pair movements such as commodity price fluctuations and political developments.
- Subscribe to news alerts from your broker such as Jetonbank to stay up-to-date with major economic announcements. Prepare to take advantage of short-term price fluctuations when announcements are made.
- Choose appropriate timeframes because intraday or 4hr/daily charts perform better under high volatility rather than weekly/monthly charts. Zoom in closer for potential breakout ranges.
- When order books are less dense the order block levels tend to show up more distinctly in minor currency pairs. Respect these levels for entries and exits.
- Technical confirmation should be sought before acting on a signal by using multiple indicators instead of depending on a single one. Multiple timeframes adds confidence.
- Protective stops should be the standard in risk management because market volatility tends to increase sharply when news breaks. Traders use trailing stops to secure gains from substantial market movements.
- Increase regional diversity in pairs by choosing currencies from various regions instead of focusing only on European markets.
Traders who use analysis specific to minor currency pairs can better identify high probability trades and manage risk in volatile conditions.
Successful trading requires both discipline and patience to achieve desired outcomes.
What Factors Influence the Value of Minor Currency Pairs in Forex?
Minor currency pairs represent smaller economies so their exchange rates respond more sensitively to specific economic and geopolitical factors unlike major pairs.
Knowing these drivers allows traders to identify catalysts that might affect prices.
- The values of currencies such as AUD, NZD, and CAD show strong relationships with export commodity prices including oil and gold.
- Regional economic data reports include employment statistics and GDP figures alongside inflation and retail sales data. from the home countries can swing pairs.
- Interest rate announcements and quantitative easing decisions represent critical elements of central bank policy for the banks of Norway, Sweden, Switzerland among others.
- Minor FX markets can be influenced by political happenings such as elections and government changes as well as domestic disturbances and international diplomatic developments.
- The value of agricultural exports drives seasonal fluctuations in currency pairs such as the NZD which strengthens during northern hemisphere winters.
- Many minor currencies maintain a connection between their strength and trade balances with major partners such as China, the EU and the US.
Forex traders at Jetonbank can identify upcoming market catalysts through influence monitoring and execute strategic trades of minor currency pairs during major scheduled and unscheduled news events. Technical analysis and risk management both benefit from a thorough understanding of influencing factors.
Jetonbank delivers an accessible yet strong trading platform that gives traders access to both major and minor currency pairs which feature narrow spreads and superior execution quality. Create your account now to discover all trading possibilities offered by the complete range of forex instruments.
Successful trading requires equal attention to risk management and finding high probability entries through the consistent use of protective stops and leverage control.
