Forex traders must consider a range of possible indicators to determine the appropriate strategy for the currency pair in question. One of the most strategy-defining aspects is which Forex pairs move the most, known as volatility. Everyone who observed Forex charts notices periods of very little price movements followed by sharp spikes and sell-offs. Knowing which Forex pairs move the most will help traders fine-tune their strategy.
What is Volatility?
Despite its sometimes-negative connotations, volatility is a normal feature of functioning markets, and traders with profitable Forex strategies seek volatility, which can yield high profits. Volatility is neither positive nor negative and merely represents the frequency at which currency pairs fluctuate.
Strategists determine volatility by calculating the variance or the standard deviation of forex price movements within a given timeframe.
What Causes Volatility in the Forex Market?
New information can cause volatility, as traders constantly adjust to economic data and other market moving developments. Since the Forex market operates 24/5, there is an ongoing data flow, and the Forex market often moves first.
The most notable volatility creators are:
- Interest rate differentials - Besides defining swap rates on leveraged overnight positions, interest rates, and central bank decisions can inject immediate volatility into Forex markets, especially if changes are unexpected.
- Geopolitics - Any geopolitical development ripples across the Forex market, which is why traders should continuously monitor significant developments and understand that markets are interconnected with politics.
- Perceived economic strength - Countries struggling with their domestic economy can see the value of their currencies decline, making GDP data, personal income, spending, and inflation data vital to analyzing perceived economic strength.
- Imports and exports - They can have a bearing on the relationship between countries trading with each other and the demand for certain currencies where a trade imbalance may exist.
Which are the Most Volatile Forex Pairs (the ones that move the most)?
There is plenty of volatility in the Forex markets, making any prediction concerning the most volatile currency pairs during select periods challenging if not impossible. The ten currency pairs listed below usually rank highly in terms of volatility.
Here is a list of Forex pairs that move the most:
AUD/JPY - Average daily pips move over the past ten weeks: 99.37 pips or 1.12%
The Australian Dollar is a commodity currency, and Japan imports a lot of its various commodities. The inverse relationship creates ample trading opportunities, especially with volatile commodity prices.
AUD/USD - Average daily pips move over the past ten weeks: 67.14 pips or 1.01%
Australia is a primary exporter of commodities, but these assets globally tend to be valued using the US Dollar. Therefore, US monetary policy can impact the Australian Dollar, creating added volatility.
CAD/JPY - Average daily pips move over the past ten weeks: 103.61 pips or 1.07%
Canada is a leading oil and commodities exporter, with Japan being a net importer, creating a similar dynamic to the AUD/JPY but focused on oil price and supply.
NZD/JPY - Average daily pips move over the past ten weeks: 97.58 pips or 1.19%
The New Zealand Dollar has a similar relationship to the Japanese Yen as Australia, but soft commodities are the most influential factor.
GBP/AUD - Average daily pips move over the past ten weeks: 142.02 pips or 0.78%
Australia is part of the Commonwealth, linking both countries in various aspects. Commodity exports and the close links between Australia and China also impact this currency pair.
USD/MXN - Average daily pips move over the past ten weeks: 1,736.65 pips or 0.93%
As close trading partners and stiff opponents in many markets, there is plenty of volatility in this currency pair, which also feels the impact of government policies like the 20% tariff on Mexican exports to the US.
USD/BRL - Average daily pips move over the past ten weeks: 591.78 pips or 1.13%
Brazil is a leading emerging market and BRICS member, offering opportunities for aggressive traders trying to take advantage of average moves of 500+ pips daily.
USD/ZAR - Average daily pips move over the past ten weeks: 2,595.06 pips or 1.40%
South Africa relies on its gold exports, priced in US Dollars, creating a close relationship and heavy pip movements driven by the emerging South African economy, also a BRICS member.
USD/JPY - Average daily pips move over the past ten weeks: 129.03 pips or 0.97%
The Japanese Yen is a safe-haven currency and the only G10 economy with negative interest rates and a persistent deflationary problem versus inflation and rising interest rates is the US, offering a unique opportunity to ‘carry trade’.
EUR/USD - Average daily pips move over the past ten weeks: 78.31 pips or 0.73%
While the EUR/USD is less volatile than other currency pairs that could complete the Top 10, like the USD/RUB, USD/TRY, or USD/ILS, it is the most liquid currency pair traded on the market, accounting for 28% of daily trading volumes with above-average volatility.
Noteworthy:
- Traders can use Forex volatility calculators, which can offer a valuable insight into average pip movements. The VIX (volatility index measure) is a common tool that can help define the current level of uncertainty and therefore market volatility.
Bottom Line
Forex traders can use a Forex volatility calculator to determine the most volatile currency pairs with the most substantial daily pip moves. It can help traders set take profit and stop loss levels while also determining which strategies to use.
FAQs
Which Forex pair moves the most pips?
The AUD/JPY, AUD/USD, CAD/JPY, NZD/JPY, GBP/AUD, USD/MXN, USD/TRY, and USD/ZAR move the most pips daily but are not the most liquid currency pairs. Among highly liquid currency pairs, the EUR/USD and the GBP/USD move between 70 to 120 pips daily, followed by the USD/CHF and the USD/JPY.
Which Forex market moves the most?
Most trading activity occurs during the London-New-York crossover session between 10:00 to 12:00 GMT.
Which is the fastest-moving currency pair?
The fastest-moving currency pairs include the currencies of the most developed countries as base or quote currencies, as they represent the most economic activity. They are the USD, EUR, JPY, GBP, CHF, CAD, and AUD.
What Forex pairs move the most during the London session?
The EUR/USD and the GBP/USD currency pairs usually move the most during the London session, followed by other Euro and British Pound crosses. Swiss Franc crosses also experience plenty of trading activity.
Which Forex pairs are most volatile?
The most volatile currency pairs include the GBP/AUD, AUD/JPY, AUD/USD, CAD/JPY, NZD/JPY, USD/MXN, USD/TRY, and USD/ZAR.
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