Trading in South Africa's main currency pairs

You are cautioned not to trade with many currency pairs concurrently and to instead trade with one or two currency pairings when choosing the finest major currency pairs traded in South Africa for beginners. You will learn and eventually succeed with trading the major currencies if you concentrate on no more than two. You can expand your trading portfolio as soon as you feel more secure and at ease.

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A currency pair is what？

The worth of one country's currency as determined by the value of another country's currency is referred to as a currency pair. When you trade a currency pair, you buy one currency while also selling another with the goal of making money off the difference. In other words, you are exchanging the stated currency for the base currency.

Example:

EUR/USD

In this illustration, EUR will serve as the base currency (the one you're purchasing) and USD will serve as the quote currency (the one you're selling).

The bid price represents the quantity of quote currency needed by a trader to purchase the required quantity of base currency.

Unfortunately, the majority of new traders are unaware of how to pick the best currency pairs to trade.

Currency Pair Types

The three categories of major, minor, and exotic currency pairs are used to categorize currency pairs.

The following are the principal currency pairings traded in South Africa:

USDZAR - South African Rand versus the US Dollar

EURUSD stands for the euro and the dollar.

GBPUSD – Great Britain Pound vs. United States Dollar

USDCHF – United States Dollar vs.

USDJPY – United States Dollar vs. Japanese Yen

AUDUSD – Australian Dollar vs. United States Dollar

You'll see that the US dollar is on one side of all the significant currency pairs. This is due to the American Dollar's dominance as the world's reserve currency, which is utilized in about 88% of all currency transactions.

The major currencies are traded all day long with small margins on extremely erratic marketplaces. They represent the most robust economies worldwide, making them the greatest currency pairs for beginners to trade.

small currencies

The minors, or cross-currency pairs, are other currencies that, despite their popularity, have no relation to the US Dollar. They have slightly broader spreads and less volatile markets than the big currencies. Due to low trading volumes, minor currencies are also not as actively traded.

Minor currencies include GBP/JPY, EUR/AUD, and EUR/GBP, as examples. Any chosen instrument will gain liquidity and stability if the EUR is present on any side of a pair.

unusual currencies

Exotic currency pairs are those that come from emerging or developing markets. Their markets are less liquid, more volatile, and generally come with higher spreads and risks.

Exotic currency pairs are unstable and unexpected because each pair contains the currency of an emerging nation. If you're worried about excessive liquidity and huge spreads, stay away from exotic currencies. Instead, because they are more stable, think about starting with major and small currencies.

The US dollar and the Singapore dollar (USD/SGD) is an example of an unusual pair.

Dollars in the United States (USD)

We shall examine why the US Dollar is significant because it is present in all of the main currency pairs traded in South Africa.

The currency of the United States and its territories is the US$, also known as the buck in slang. The US Dollar is referred to as a “greenback” in the financial press of other nations, alluding to its green banknotes.

More than half of all trades on the FX market include the US Dollar. Because the US dollar is strong, governments keep onto it and purchase other currencies from their foreign exchanges.

The ability of the United States to pay its obligations has earned it respect and confidence throughout the world. As a result, the USD maintains its status as the strongest currency in the world and will hold this position for the foreseeable future.

South African Rands and US Dollars are expressed as USD/ZAR.

The South African Rand is one of the most traded currencies in Africa. Due to its volatility, the South African Rand is traded and has grown to be preferred by traders.

After leaving the British Pound in 1961, the South African Rand was officially recognized as money. The Rand was stable until 1994, when apartheid came to an end. Since then, it has significantly weakened, particularly as a result of Eskom's failure to meet the nation's electricity needs and unfavorable politics, including when then-President Jacob Zuma fired the finance minister in late 2013.

State-owned Eskom Holdings was deemed to be the greatest economic risk to South Africa in September 2017 by Goldman Sacks, primarily because of its debt and wrongdoing. This was partially a result of Eskom not having a permanent CEO at the time.

ZAAR and the cost of gold

The value of the Rand was once correlated with the price of gold, which is South Africa's primary export. The Rand suffered during the 2008 financial crisis, therefore investors opted to place their money in other currencies, such as the US Dollar and the Japanese Yen. Sadly, in a year, the Rand's value decreased by close to 50% against the US dollar.

The Rand may become correlated with gold prices due to South Africa's economy's reliance on its gold exports. However, the Rand is still a very volatile currency that is highly dependent on global uncertainties.

The dollar ZAR average daily trading volume was 135,450 as of April 7, 2021.

What influences the prices？

The USD/AUD currency pair, which is also known as a commodity currency pair, has less liquidity. This occurs as a result of the strong correlation between the prices of gold and oil. Australia is a major producer of gold, hence it is very dependent on gold prices.

The AUD/USD pair also gets referred to as “The Aussie.” The Australian Dollar gets its value from its exports, such as minerals and metal, making a large part of Australias GDP. The AU Dollar will likely depreciate if there was a decline in these commodities in the global market. Should this happen, there will be an appreciation in the US Dollar, therefore costing less US Dollars when purchasing one Australian Dollar.

The AUD also gets affected by the differences in interest rates between the US Federal Reserve and the Reserve Bank of Australia (RBA). It would cost more USD to buy one AU Dollar if American interest rates get low, and the US Dollar will then weaken against the AUD.

The Best Major Currency Pairs Traded in South Africa: How to Find Them

The most liquid and stable economies are preferred by most traders when choosing the top major currency pairings traded in South Africa.

The most actively traded currency pair on a daily basis is EUR/USD. Investors who trade for profit are aware that other currency pairs provide similar opportunities. Find various currency pairs with a lot of liquidity.

Think about the trading hours for the trading session when selecting a currency pair. The main trading hubs where time zones are crucial to traders are Asia, the United States, and Europe.

Make sure to take into account the market's opening and closing times as well as their locations.

Currency Pairs: Some Things to Keep in Mind

The following elements should be taken into account when choosing the ideal currency pair to trade with:

Strategy for Trading Spread Volatility

How challenging it is to predict the course of the market

Consider your best trading time frames and the best trading time frames for the currency pair before choosing a pair. Avoid selecting a currency that opens in the middle of the night if it is not practicable for you to do so.

Once you have some experience trading one big currency pair, you can start adding other major currency pairings to your portfolio.