Trading Minor Currency Pairs

Most of the forex market trading occurs with the major currency pairs. There are three minor currency pairs, also known as small dollar pairs, which complete the pairs featuring the U.S. dollar. Together, the minor currency pairs are commonly designated as commodity currencies.

The three minor currency pairs are:

  • USD/CAD- the U.S. dollar versus the Canadian dollar
  • AUD/USD- the Australian dollar versus the U.S. dollar
  • NZD/USD-the New Zealand dollar versus the U.S. dollar

The name “commodity currencies” refers to the major presence oil, metals, agriculture and mining hold in the national economies of Canada, Australia and New Zealand. In fact, Australia is the leading exporter of metals, coal and grains.  The USD/CAD and AUD/USD conducts 5 and 6 percent of the global daily trading volume.

The United States economy and the Canadian economy are closely related and this tight relationship is reflected in the USD/CAD. There are a few reasons for this. First, the United States and Canada are each other’s largest commercial trading partners. Second, the majority of Canadians live within 100 miles of the U.S. border.

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When analyzing the AUD/USD, it is important to pay attention to the Reserve Bank of Australia, which is also the central bank, and the finance minister. Any movement in these will be sure to move the AUD/USD drastically.

In regards to the NZD/USD, it is the most interest-rate sensitive of all the currencies. Trading of the NZD/USD is closely linked to the Australian data due to the strong trade and regional relationship between the two countries, Australia and New Zealand.