Beyond the Majors: A Trader’s Guide to Finding Opportunity in Forex Cross Pairs

For most aspiring forex traders, the world of currency trading begins and ends with the “majors.” Pairs like the EUR/USD, GBP/USD, and USD/JPY dominate the headlines, analysis, and trading volumes. They are the blue-chip stocks of the forex world—liquid, heavily scrutinized, and the default starting point for almost everyone. While trading the majors is essential, limiting yourself to them is like visiting a world-class restaurant and only ever ordering from the appetizer menu.

The real depth, nuance, and often, the clearest opportunities, lie in the vast and fascinating world of the “cross pairs.” These are currency pairs that do not involve the US dollar. By learning to analyze and trade crosses like the EUR/JPY, AUD/CAD, or GBP/CHF, traders can unlock a new dimension of market analysis, hedge their exposure, and capitalize on cleaner, more direct economic themes that are often noisy and distorted in the major pairs.

What Are Cross Pairs and Why Do They Matter?

A cross pair simply pits two non-US dollar currencies against each other. For example, if you believe the Eurozone economy is set to outperform the UK economy, you could express that view by buying the EUR/GBP. You are making a direct bet on the relative strength of Europe versus Great Britain, without having to introduce a third variable: the performance of the US dollar.

This is the core advantage of trading crosses. When you trade a major pair like EUR/USD, your trade’s success depends on two independent factors: the strength of the Euro and the strength of the US Dollar. The Euro could be strengthening, but if the US Dollar is strengthening even faster, your EUR/USD trade will still lose money. The dollar’s role can create noise and mask the true, underlying trend.

Cross pairs strip away this layer of complexity, allowing you to isolate a specific economic thesis. They let you answer purer questions: Is Australia’s commodity-driven economy stronger than Canada’s? Will the Bank of England’s policy be more hawkish than the Swiss National Bank’s? Trading the corresponding cross pair—AUD/CAD or GBP/CHF—is the most direct way to act on these views.

The Playbook: Three Categories of High-Opportunity Crosses

While there are dozens of cross pairs, they can be grouped into strategic categories, each offering a unique type of trading opportunity.

1. The Risk Barometers: The Yen Crosses (e.g., EUR/JPY, GBP/JPY, AUD/JPY)

The Japanese Yen crosses are the market’s premier vehicles for trading global risk sentiment. Because of the Bank of Japan’s historically ultra-low interest rates, the yen has long been a “funding” currency. In optimistic “risk-on” environments, global investors borrow cheap yen to invest in higher-yielding, riskier assets around the world. This action involves selling the yen, which causes the yen crosses to rise sharply.

Conversely, during times of fear and uncertainty (“risk-off”), this process violently reverses. Investors sell their risky assets and repatriate their capital back into the safety of the yen. This causes the yen crosses to plummet.

How to Trade Them:

• Theme: Use these pairs to trade your view on the overall health of the global economy. If you believe stock markets are set for a rally and economic data is strong, look for opportunities to buy yen crosses. If you foresee a recession or a geopolitical crisis, look to sell them.
• The Best Performer: To choose which yen cross to trade, identify the strongest trending “risk” currency. If European data is particularly robust, EUR/JPY might offer the cleanest trend. If Australian commodity prices are soaring, AUD/JPY will likely be the leader. The yen crosses are powerful vehicles for momentum and trend-following strategies.

2. The Policy Divergence Pairs: The European Crosses (e.g., EUR/GBP, EUR/CHF, GBP/CHF)

These crosses are driven by the intricate dance of monetary policy and economic health within Europe. They are less influenced by broad global risk sentiment and more by local, nuanced factors.

• EUR/GBP: This is the ultimate “Brexit Barometer” and a pure play on the relative economic fortunes of the Eurozone and the United Kingdom. It is driven by the policy divergence between the European Central Bank (ECB) and the Bank of England (BOE). If the BOE is perceived as being more hawkish (more aggressive on fighting inflation) than the ECB, the pound will likely strengthen, sending EUR/GBP lower. This pair is a favorite of fundamental traders who closely follow central bank statements and inflation data from both regions.
• EUR/CHF & GBP/CHF: These pairs pit the major European currencies against the traditional safe-haven Swiss Franc. They are driven by both policy divergence and risk flows within Europe itself. When a crisis hits the Eurozone, capital often flows directly into Switzerland, strengthening the franc and pushing EUR/CHF and GBP/CHF lower.

How to Trade Them:

• Theme: Use these pairs to make tactical bets on central bank decisions and relative economic data. They often trend for long periods when a clear policy divergence emerges and tend to be less volatile than the yen crosses, making them suitable for swing trading.

3. The Commodity Crosses (e.g., AUD/CAD, AUD/NZD, CAD/CHF)

This group allows you to trade the relative strength of commodity-exporting nations, isolating specific raw material themes.

• AUD/CAD: This is the classic “hard commodity” cross. It pits Australia’s iron ore-driven economy against Canada’s crude oil-driven economy. It effectively allows you to trade the relative performance of iron ore versus oil. If you believe global industrial demand will boost steel production more than transportation demand will boost oil prices, you would look to buy AUD/CAD.
• AUD/NZD: This pair matches Australia’s hard commodity exports against New Zealand’s soft commodity (primarily dairy) exports. It’s also sensitive to the monetary policy of the Reserve Bank of Australia (RBA) versus the Reserve Bank of New Zealand (RBNZ), two central banks that often move independently. The trend is often slow, grinding, and technically clean, making it popular with technical swing traders.

How to Trade Them:

• Theme: Develop a thesis on the outlook for key commodities. Before you even look at the chart for AUD/CAD, look at the charts for iron ore and WTI crude oil. The fundamental story found in the raw materials will often foreshadow the next major move in the currency cross.

Risk Management for Crosses

While crosses offer cleaner trends, they are often less liquid than the majors. This can mean slightly wider spreads and potentially faster price movements (slippage) during illiquid hours. It’s crucial to account for this:

• Position Size Appropriately: Your risk on any trade should still be a small, fixed percentage of your account (e.g., 1%).
• Understand Volatility: Use the Average True Range (ATR) indicator to gauge the pair’s typical volatility and set your stop-loss accordingly. An AUD/NZD stop will be much tighter than a GBP/JPY stop.
• Stick to Liquid Hours: For the best execution, trade crosses during the trading session when their respective currencies are most active (e.g., trade EUR/GBP during the London session).

Conclusion: Unlock a New Level of Analysis

Learning to see the market through the lens of cross pairs is a hallmark of a developing trader. It forces you to think more deeply about the interconnectedness of global economies and liberates you from a singular focus on the US dollar. By isolating specific themes—risk appetite, policy divergence, or commodity performance—you can often find cleaner trends and more logical trading opportunities than are available in the crowded major pairs. Start by adding one or two key crosses to your watchlist. Analyze their unique drivers. You will soon discover a richer, more nuanced market landscape brimming with untapped potential.