Most traders naturally gravitate toward major currency pairs when hunting for tight spreads. These pairs like EUR/USD or GBP/USD are heavily traded, well-known, and typically offer narrow spreads due to their liquidity. However, there is a world of opportunity in cross currency pairs for those willing to look beyond the mainstream. With the right knowledge and timing, it is possible to secure the best Forex spreads even in these lesser-traded instruments.
What Are Cross Currency Pairs?
A cross currency pair is any pair that does not include the US dollar. Examples include EUR/JPY, GBP/CHF, and AUD/NZD. These pairs derive their pricing from the relative value between the two currencies, without needing to be converted through the dollar. While they are less liquid than major pairs, some of them still maintain respectable trading volumes, especially during regional market hours.
For traders looking beyond the typical offerings, these pairs provide new dynamics and unique movement characteristics that can be used to your advantage. Although a bit risky, this pairs are very useful in the long run.
Not All Cross Pairs Are Created Equal
Some cross pairs consistently offer more favorable spreads than others. For instance, EUR/GBP is a favorite among many European traders due to the strong economic relationship between the eurozone and the United Kingdom. This pair often has better liquidity than other cross pairs, which in turn results in lower spreads.
On the other hand, exotic cross pairs like NOK/CHF or NZD/SGD tend to carry much wider spreads, especially outside of regional session hours. When trying to access the best Forex spreads, traders should start by focusing on cross pairs that have higher trading volume and clear directional behavior.
Trading During Overlapping Market Sessions
Timing matters when it comes to spreads. With cross currency pairs, it is even more important to trade during the active hours of both currencies involved. For instance, if you are trading EUR/JPY, the ideal window would be the overlap between the London and Tokyo sessions. This is when both the euro and the yen are active, increasing liquidity and tightening spreads.
This type of timing strategy is essential for traders who are focused on consistently achieving the best Forex spreads outside the major pair universe.
Check for Broker-Specific Conditions
Some brokers offer very competitive spreads on certain cross pairs as part of their promotional or institutional pricing model. Traders who stick with major pairs may never notice that their broker quietly offers better-than-average spreads on something like AUD/JPY or EUR/CHF.
It is worth asking your broker or checking live quotes during different market sessions. Sometimes, the best Forex spreads are hidden in plain sight on pairs that the average trader ignores.
Cross currency pairs might not be the obvious choice for spread-focused traders, but they hold considerable potential. By focusing on liquidity windows, choosing pairs with stronger market depth, and checking broker-specific offerings, you can uncover hidden gems. The best Forex spreads are not limited to majors. With the right strategy, you can find low-spread opportunities even in areas of the market others overlook.