How to Trade the Majors with Currency Crosses

Even if you never wish to trade currency crosses and prefer to stick to the majors, you can use crosses to aid in your forex trading selections.

Currency crosses can reveal information about each major currency pair's relative strength.

Assume you see a buy signal for EUR/USD and GBP/USD, but you can only trade one of them.

Which one are you going to choose？

It's unlikely that simply staring into your crystal ball and guessing will yield the correct answer.

You'd glance at the EUR/GBP cross to determine the correct answer.

If EUR/GBP is going downward, that means the pound is currently stronger than the euro.

Because of the pound's relative strength against the euro, the correct solution is to buy GBP/USD rather than EUR/USD.

Because the euro is weaker than the pound, if it strengthens against the dollar, it will do so at a slower rate than the pound.

If the US dollar falls across the board, the GBP/USD pair will gain more pips since it will rally higher than the EUR/USD pair.

As a result, the superior trade is GBP/USD.

This relative strength study can be performed on any of the main currency pairs.

Which Currency Cross Should You Use？

Let's pretend you're a bear on the greenback. What method will you use to trade？

Having trouble deciding whether to sell USD/CHF or purchase EUR/USD？ Take a look at EUR/CHF.

Having trouble deciding whether to purchase USD/CHF or USD/JPY？ Take a look at the CHF/JPY exchange rate.

Having trouble deciding whether to sell USD/JPY or purchase EUR/USD？ Take a look at EUR/JPY.

Having trouble deciding whether to sell USD/CHF or purchase GBP/USD？ Take a look at the GBP/CHF exchange rate.

Having trouble deciding whether to sell USD/JPY or purchase GBP/USD？ Take a look at the GBP/JPY exchange rate.

Always remember that looking at currency cross pairs might offer you a sense of a currency's RELATIVE strength.