Let’s be honest, the old playbook for picking forex pairs is looking a bit… dusty. For years, traders could lean on broad narratives like globalization and dollar dominance. But the ground is shifting. Geopolitical fragmentation—the world splitting into competing blocs—isn’t just a news headline. It’s rewriting the rules of the currency game.
And for anyone thinking about long-term forex pair selection, that means we can’t just look at interest rate differentials anymore. We have to look at alliance differentials. Which currencies are huddling together for warmth? Which are being left out in the cold? Let’s dive in.
From Globalization to Bloc-ification: A New Trading Reality
Think of the global economy not as a single, interconnected web anymore, but more like a high school cafeteria. You’ve got the tables where everyone sits. The U.S.-led table with its close friends (USD, CAD, maybe a chunk of EUR). The BRICS+ table, which is getting pretty crowded and noisy. And other regional cliques forming their own pacts.
This “bloc-ification” directly challenges the supremacy of traditional, freely floating major pairs like EUR/USD as the be-all and end-all. Their volatility might still be attractive for short-term plays, sure. But their long-term trends will be increasingly dictated by the political and economic distance between these blocs, not just their economic data.
How Currency Blocs Reshape Liquidity and Correlation
Here’s the deal: when countries in a region start settling more trade in their own currencies or a shared basket, it does something profound. It starts to internalize liquidity. Money that used to always flow through USD as the middleman now takes a shortcut.
This means pairs like CNY/JPY or INR/AED might see liquidity deepen over the next decade, becoming more than just exotic curiosities. Conversely, the correlation between, say, the Mexican Peso (MXN) and the Chinese Yuan (CNY) could strengthen if their nations’ trade and investment ties deepen within a shared framework—even if their direct pair isn’t heavily traded.
For the long-term selector, it’s about spotting these nascent corridors of flow.
A Practical Framework for Selecting Pairs in a Fragmented World
Okay, so how do you actually apply this? It’s less about a rigid checklist and more about adopting a new lens. You need to think like a political risk analyst as much as a chart technician.
1. Categorize the Pairs by “Bloc Proximity”
| Pair Type | Example | Long-Term Consideration |
| Intra-Bloc Pairs | EUR/PLN, BRL/ARS | Lower volatility from shared goals, but vulnerable to internal bloc disputes. Range-bound trends might dominate. |
| Cross-Bloc Pairs | USD/CNY, EUR/INR | Higher volatility, driven by geopolitical tension & trade policy. Trends can be powerful but prone to sudden shocks from sanctions or tariffs. |
| Anchor Currency Pairs | USD/BRL, EUR/TRY | Classic “dollar bloc” dynamics. Watch for de-dollarization efforts within the partner country that could weaken this historical link. |
2. The “Sanctions & Swift” Overlay
This is a huge one. Geopolitical fragmentation makes financial weapons—like cutting off SWIFT access or freezing reserves—more likely. A currency’s long-term viability now hinges on its payment system independence.
Ask yourself: does this currency have a credible alternative messaging system (like China’s CIPS)? Does its home country hold diverse reserves? If the answer is no, that currency carries a hidden fragility that a major geopolitical event could expose. Honestly, it adds a whole new layer of fundamental risk.
3. Follow the Commodity & Supply Chain Maps
Fragmentation reroutes supply chains. And where goods flow, money follows. If Country A in Bloc 1 becomes the sole supplier of a critical mineral to Bloc 2, their currency pair becomes a direct proxy for that relationship.
So, for long-term selection, you might be better off looking at AUD/CNY (iron ore, China ties) than something less tethered to a tangible, cross-bloc necessity. It’s about finding the currencies that sit at the choke points—or the newly built bridges—of these decoupling supply chains.
What This Means for Classic Major Pairs
Don’t get me wrong, EUR/USD isn’t disappearing. But its drivers are morphing. It will increasingly trade as a political barometer between the Atlantic and Eurasian blocs. A tweet about tariffs might cause a bigger spike than a minor ECB policy tweak.
Meanwhile, pairs like USD/CHF or USD/JPY might see their safe-haven roles amplified during intra-bloc crises, but tested during true cross-bloc confrontations. Will the Swiss Franc hold its charm if the fragmentation gets really severe? It’s an open question.
The point is, you have to re-interpret these old favorites through the new lens.
Building a Future-Proof Watchlist
So, pulling this all together, here’s a non-exhaustive, slightly subjective list of pair categories that could gain prominence—or require a complete rethink.
- The Digital & Resource-Backed Upstarts: Watch pairs involving currencies from nations experimenting with CBDCs or explicit commodity-backing (e.g., a potential Gold-backed BRICS unit). They’ll be volatile but trend-defining.
- The Regional Workhorses: Pairs within ASEAN, the African Continental Free Trade Area (AfCFTA), or the Gulf Cooperation Council (GCC). As their regional integration deepens, their cross-rates become more meaningful.
- The Strategic Commodity Corridors: CAD/CNY (oil), AUD/CNY (iron ore), RUB/INR (energy). These are the arteries of the fragmented world. Their flows are sticky and politically strategic.
- The “Neutral” Proxies: Currencies of nations adept at walking the line between blocs (think Switzerland historically, maybe certain Southeast Asian nations now). They could become volatility sinks, but that status is fragile.
Look, the goal isn’t to throw out your entire strategy. It’s to layer this geopolitical map over your existing charts. The most successful long-term forex pair selection will come from those who see the currencies not just as economies, but as political statements in a world that’s reluctantly, but decisively, choosing sides.
The quiet hum of globalized finance is being replaced by the louder, sharper noises of competing systems. Your portfolio should listen.
