Minor Currency Pairs Guide — Cross-Currency Trading
Minor currency pairs, also called cross pairs, do not include the US dollar. They combine two major currencies directly, such as EUR/GBP, EUR/JPY, and GBP/JPY. Cross pairs offer unique trading opportunities but have wider spreads and lower liquidity than majors.
Cross pairs were historically traded by banks and institutions but are now accessible to retail traders. The most liquid crosses are in the European and Asian time zones: EUR/JPY, EUR/GBP, GBP/JPY, EUR/CHF, GBP/CHF, and EUR/AUD. These pairs are created by combining two majors, which means their price action is influenced by the relative strength of both currencies against the dollar. For example, EUR/JPY rises when the euro is stronger than the yen, which can happen when EUR/USD rises and/or USD/JPY falls. This two-factor dynamic creates both opportunities and complexity.
Trading characteristics: spreads on crosses are typically 2-5 pips compared to 0.5-2 pips for majors. Daily ranges can be larger — GBP/JPY (the dragon) averages 120-200 pips daily, making it one of the most volatile forex pairs. EUR/CHF has been relatively stable since the Swiss National Bank removed the floor in 2015 but still moves on safe-haven flows. EUR/GBP is driven by relative economic performance between the eurozone and UK. Cross pairs are often used for carry trades because of larger interest rate differentials between non-USD currencies. For example, the classic carry trade of buying AUD/JPY exploits the difference between high Australian rates and low Japanese rates. Cross pairs also allow traders to express views on specific economies without the dollar noise.
Trading Cross Pairs
Cross pairs require understanding of both component currencies. If EUR/USD is trending up and USD/JPY is also trending up, EUR/JPY may trend up with extra momentum as both components push in the same direction. If EUR/USD is up but USD/JPY is down, EUR/JPY may move sideways or reverse. This makes cross pair analysis more complex but also creates diversification opportunities. Correlations between crosses and majors vary: EUR/GBP has low correlation with major pairs, making it useful for diversification. Many traders use crosses to avoid dollar risk when they have no view on the US economy. Cross pairs have distinct session characteristics — EUR/JPY is most active during the Asian and London overlap; GBP/JPY is volatile during London session but less active during US hours.
FAQs
What is the difference between major and minor currency pairs?
Major pairs include the US dollar. Minor pairs (crosses) do not. Majors account for about 80% of forex volume and have the tightest spreads and highest liquidity. Crosses offer diversification and potentially larger moves but have wider spreads, higher transaction costs, and sometimes unpredictable behavior due to the two-component dynamic.
Which cross pair is most popular?
EUR/JPY is the most actively traded cross pair, followed by EUR/GBP and GBP/JPY. EUR/JPY benefits from the liquidity of both the euro and yen, and its daily range of 80-140 pips makes it attractive for both day traders and swing traders. GBP/JPY is popular for its high volatility but carries higher risk.
Are cross pairs suitable for beginners?
Beginners should start with major pairs (EUR/USD, USD/JPY) before trading crosses. The two-currency dynamic makes analysis more complex. Spread costs are higher, eating into thin profit margins for scalpers. However, once comfortable with forex fundamentals, crosses offer diversification and unique opportunities, especially for traders who want to avoid USD exposure in their analysis.