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Neither all currency pairings are created equal — not in terms of the spreads brokers give on them nor in terms of volatility or predictability. ? When a currency pair reaches key support or resistance line, it will either slow down and finally turn around — or it will make a clean break and leave dust in its behind.
On the fundamental level, a more predictable currency pair moves consistently in reaction to data, its central bank avoids major shocks, and it is less susceptible to headlines.
- AUD/USD:
For numerous years, the Australian dollar has ranked high in terms of predictability, and for good reason. This currency pair tends to travel in plainly defined uptrends and downtrends, and when it breaks out of them, the shift in direction is quick and apparent.
Furthermore, the Australian dollar is the best “risk currency,” having a significant link with stock markets. It has lately been less associated with Chinese statistics, which is excellent news because data from the world’s second-largest economy may be confusing. Locally, the Reserve Bank of Australia avoids major shocks while also enabling traders to respond to Australian data.
2. USD/JPY:
This currency pair has experienced periods of difficult and inconsistent range trading, but that is no longer the case. It pays more attention to support and resistance lines than it used to, and its recent higher trading ranges indicate that it is finally having its time.
Fundamentally, USD/JPY has a strong link with US bond rates and continues to be the strongest pair to trade US data.
3. USD/CAD:
This currency pair has experienced periods of difficult and inconsistent range trading, but that is no longer the case. It pays more attention to support and resistance lines than it used to, and its recent higher trading ranges indicate that it is finally having its time.
Fundamentally, USD/JPY has a strong link with US bond rates and continues to be the strongest pair to trade US data.
4. NZD/USD:
Technically, the kiwi is a fantastic pair to trade because it produces huge breakouts and then races to the next support or resistance line to halt. It has, however, had its fair number of false starts.
Fundamentally, the NZD mimics the AUD in response to stock market movements, although the Reserve Bank of New Zealand prefers surprises over their counterparts in Canbera. This reduces its rating.
5. EUR/USD:
Because it has so many moving pieces, the world’s most popular currency pair is more difficult to trade and necessitates more skill. Trading EUR/USD, on the other hand, gets considerably easier if the trader becomes aware of the pair’s proclivity to make an early false break.
Recent uncertainty has been surprisingly beneficial to the pair, and this is likely to continue.
GBP/USD It’s just too choppy, with the occasional Brexit headline. USD/CHF is vulnerable to Swiss National Bank intervention – certain traders and brokers will never forget the 2015 “SNBomb.” The franc may be a safe refuge for investors, but it is not a safe haven for traders.
It is critical to understand the technical and basic predictability of currency pairings – and to monitor their progress. Forex trading is never a one-way track, and understanding when to exit a currency pair that has lost predictability is crucial.