Why the U.S. Dollar Dominates the Forex Market
Did you know that more than 80% of all forex transactions involve the U.S. dollar?
That’s because the U.S. dollar is considered the world’s reserve currency.
You might be wondering, “Why the dollar? Why not the British pound or the euro?”
Well, here’s the deal: most global commodities—like oil and agricultural goods—are priced in U.S. dollars. So if a country wants to buy oil, it first has to convert its local currency into U.S. dollars.
That’s why many countries keep large amounts of U.S. dollars in their reserves. It makes international purchases faster and smoother.
For example:
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China holds over $3 trillion in U.S. dollar reserves.
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Japan and Switzerland each hold over $1 trillion.
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Even countries like Australia and Japan, which import lots of oil, maintain huge reserves of dollars.
What Does This Mean for You as a Forex Trader?
Since so many countries depend on the U.S. dollar, traders around the world often focus on just one big question:
“Is the U.S. dollar strong or weak today?”
This single speculation drives much of the trading activity in major currency pairs like:
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GBP/USD
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EUR/USD
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USD/JPY
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USD/CHF
And even commodity-related pairs like:
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AUD/USD
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USD/CAD
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NZD/USD
As you can see, they all involve the U.S. dollar.
So when you're trading these pairs, you're really just choosing between being pro-dollar or anti-dollar. That can get pretty limiting.
Compare that to the stock market. Investors can pick from hundreds of companies, each influenced by its own set of factors. You don’t need to rely on one major trend.
Why Currency Crosses Are a Game-Changer
If you stick only to the seven major USD-based pairs, you're putting all your trades in the same basket. But currency crosses open the door to a whole new world of trading opportunities.
Because these pairs don’t include the U.S. dollar, their movements are driven by different factors—like local economic data, interest rate decisions, or regional geopolitical events.
For example:
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If all the dollar-based pairs are moving sideways or stuck in ugly, choppy ranges…
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You could be wasting time waiting on a decent setup.
But if you switch over to currency crosses like:
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EUR/GBP
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EUR/JPY
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GBP/CHF
You might discover plenty of trade setups with better price action.
Think Beyond the Dollar
Most traders focus only on the majors. But if you want to level up your trading game, explore currency crosses.
Be different. Be smarter. Open your charts and start looking beyond the U.S. dollar.