Although forex markets are characterized by volatility, some are more volatile than others. In forex, a currency market can have high or low fluctuations depending on how much its value deviates from the average. Currency markets can be volatile for different reasons, including fear and negative economic news. Since currency markets are so volatile, measuring them with indicators on your charts, like the relative strength index and average true range, is essential. This guide will take a closer look at the most volatile currency markets over the past year.
Most Volatile Currency Pairs in 2023
Volatility in currency markets fluctuates regularly, so it might be hard to pin down the absolute most volatile pairs. We compiled a list of the major and minor volatile currency pairs that have displayed high volatility in the past year.
AUD/USD
One of the currency markets with the highest trading volume is AUD/USD, but it is also among the most volatile pairs because it has the US dollar. Australia is among the significant commodities of coal and iron, affecting the economy. If you’re considering trading forex, AUD/USD is a popular pair, especially during the London session, because of how global financial activity affects it.
USD/JPY
Another pair you can consider is USD/JPY, which is usually hard to predict because of the tight control from the Bank of Japan. If you’re considering trading this pair, you can consider intraday level breakouts at the beginning of the Asian session.
CAD/USD
You can also consider CAD/USD when looking for volatile currency markets of the past year. This pair is volatile primarily because of Canada’s commodity economy rather than the US dollar, which works as a benchmark. A border separates the countries, so the economies are active simultaneously. This makes them volatile during the New York trading session.
GBP/USD
GBP/USD is also a highly volatile currency market and a significant pair that makes up 12% of all the foreign exchange trading volumes. The high volatility is due to the UK’s monetary policy from the Bank of England and the impact of Brexit. The UK is famous for its financial centers, especially since most forex traders trade GBP.
NZD/USD
NZD is also reliant on the commodity economy of New Zealand, as the country has primarily agricultural exports like timber, milk, meat, and eggs, making it volatile. It also exports to China, Australia, and other neighboring countries, so there are not a lot of factors connecting the NZD to USD. Since both currencies are from different types of economies, they are volatile when paired.
GBP/AUD
The British pound and Australian Dollar also combine to form a volatile currency market. Both countries have different economies, exports, and trading partners, so there isn’t much that connects them. AUD is a commodity currency that trades with China and other Asian countries, while GBP primarily trades with US and European nations. However, the poor trade relations between the US and China and their differences affect this currency pair.
AUD/JPY
One of the most volatile currency markets you can look for is AUD/JPY. The Australian Dollar is based on the country’s mineral and metal exports as a commodity currency. At the same time, the Japanese Yen is a safe-haven currency since the country has low-interest rates. During market turbulence, traders move towards the Yen, causing the pair to be volatile.
EUR/GBP
Two of the most traded currencies are EUR and GBP, making up a significant portion of currency reserves. But, due to Brexit, there has been a lot of volatility in this pairing since the British and EU economies separated. However, the EUR is easily vulnerable because it is tied to multiple economies, while the GBP is more independent and offers new opportunities for volatility. Luckily, both currencies are closely linked, so you can easily trade this volatile currency pair.
NZD/JPY
The NZD/JPY pair is similar to AUD/JPY, as the New Zealand dollar fluctuates frequently, while the Japanese Yen is stable and a reserve currency. So, when a volatile currency like the NZD is paired with JPY, it creates room for the prices to fluctuate.
CAD/JPY
This is another pair that combines a volatile currency with the Yen, a stable, safe-haven currency. Japan is a high-industry country heavily dependent on oil, while Canada is a significant oil exporter. Both countries don’t trade oil together as much, but the global prices affect their economies and make the pair volatile.
Trading Volatile Currency Pairs
If you want to trade volatile currency pairs, you can start with less volatile ones like NZD/USD and CAD/JPY before moving on to the more volatile and larger markets like USD/JPY and AUD/USD. You should research the pair you want to trade and conduct technical and fundamental analysis. For volatile forex markets, some good strategies include position sizing, stopping loss, and taking a profit. You should also reduce position sizes when trading in volatile currency markets and consider pairing with JPY since it’s a stable currency.