Forex trading has become a popular pursuit for those looking to turn a profit on the global currency exchange in recent years, thanks to its easy accessibility even without masses of capital to begin with, as well as offering high liquidity and endless opportunities each day. And in 2023, with fluctuating global economies, there’s certainly some money to be made on the Forex market if you know what you’re doing.
Knowing which currency pairs to focus on is one of the keys to success and, at present, there are certain duos that are offering some particularly impressive returns if leveraged correctly.
A currency’s strength depends on internal and external factors, such as economic stability, international relations, and value in the global market but, given the dynamic conditions that affect the economy, the state of said currencies may not always be the same. This year, the biggest trending currency pairs in the forex market are constantly changing due to a complex set of global economic conditions and geopolitical events – from the repercussions that are still being felt from the Covid-19 pandemic, to Russia’s invasion of Ukraine, and the ongoing impact of Brexit.
For companies engaging in international business, as well as individuals who trade forex, these uncertain conditions provide an opportunity to leverage the ever-changing exchange rate to make even bigger profits. The USD, EUR, JPY, GBP, and CHF are some of the common and trending currencies in 2023 – but which pairs should you be training your eye on if you want to see success, and why exactly are they trending in the first place?
Why are certain currencies trending?
As we’ve mentioned, global political and economic events are important factors that affect the popularity and value of currencies – and the pressures that particular countries find themselves under this year means that their currencies have become a particular area of focus for seasoned traders.
The USD, Brazilian Real, and Chinese Yuan, for example, are trending largely because of the formation of BRICS, the economic alliance involving Brazil, Russia, India, China, and South Africa. The alliance seeks a common currency for those five countries, bypassing the US dollar as the dominant currency in global trading, and while the move has generated various reactions, the long-term impact holds significant potential for the forex market.
Another reason the US Dollar is trending is the increase in federal rates within the USA. The US Reserve Bank has raised interest rates eight times since 2022, targeting a stable rate of less than 4.75 per cent, and also voted to raise the rates to 4.9 per cent in March. The higher interest rates rise, the more demand for the dollar from international investors seeking yield, and thus just last month, the USD reached its highest price since November 2022.
Latest data on trending currency pairs
USD/BRL
The BRL has gained on the USD in recent trading days thanks to new agreements by Brazil to gradually move from the USD to the Chinese Yuan as its reserve currency. Today, the BRL has overtaken the EUR as Brazil’s second-most popular currency reserve and since 2022, the nation has had around 5.37 per cent of its foreign reserves in Yuan, while EUR reserves are currently at 4.74 per cent. Signing trade and political agreements has helped Brazil increase the volume of the BRL within a short timeframe, and as a result, data obtained from TradingView shows that the market sentiment on the USD/BRL pair is a Strong Sell, indicating that traders are increasingly selling the USD to buy BRL.
GBP/JPY
The British Pound and the Japanese Yen pair has a generally bullish sentiment, occasioned by recent economic growth in the UK – albeit it minimal. While a strong economy backs the Japanese Yen, investors still hold the British Pound higher, and currently, the pair is up by 3.52 per cent in the year to date, having increased by 0.41 per cent in the last month. The UK-Japan trade agreements remain critical to the future of the GBP/JPY pair, however, so what the future holds remains to be seen should this change.
EUR/JPY
The EUR/JPY is another trending currency pair, currently trading at 144.02. The market sentiment is leaning towards a Strong Buy, having increased by 3.65 per cent in the year to date. The Eurozone economy is working through increased energy rates and tough economic conditions, but the EUR has stayed above water in recent months. The Japanese Yen also tends to struggle against the USD, EUR, and GBP, dropping 0.8 per cent to a 24-year low of 136.18 per dollar in 2022.
EUR/USD
The EUR/USD pair has returned a 2.49 per cent increase in the last year and is amongst the highest performing in recent months. Despite the economic conditions in the Eurozone and the US, both currencies continue to hold going into the year, and while the EUR and USD did achieve parity in 2022, the current value of 1.09 suggests the EUR has the upper hand.
The market sentiment remains bullish.
GBP/USD
At 1.250, the GBP fares better than the USD on the exchange rate, but the UK economy is also recovering and starting a long path to sustained progress. Post-2020 events have left the UK grappling with internal and external factors that are putting pressure on the economy. The GBP/USD poses a 3.40 per cent year-to-date profit today, and the general sentiment is bullish.
Events to watch out for
The recent announcement by OPEC that it would cut oil production has left countries reeling and taking steps to adjust to the inevitable economic impacts as shockwaves are felt.
Crude oil prices play a significant role in global economics and will impact the foreign exchange market in the coming months, and calls for increased oil production to reduce gas prices may be a factor when decisions are made.
The BRICS alliance is also key to global economic dynamics and will shape the forex market outlook in the coming months. The USD remains the world’s largest reserve currency, but changing political alliances may impact that. As the country pushes its domestic economy to greater heights, policies to counter the BRICS may be essential to investors and traders in the Forex market.
As a forex trader, the key factors that impact oil and gas prices should be considered when analysing currency pairs to find profitable trading setups – so make sure to monitor market factors while trading to improve your results.
Disclaimer: Investing money carries risk, do so at your own risk and we advise people to never invest more money than they can afford to lose and to seek professional advice before doing so.
