Not all currency pairs are born equal: some will make a convincing follow through when breaking clear lines of resistance or support, leaving only dust behind them. Or when they don’t have momentum, they will slow down and back off very close to these lines. These kind of pairs are the more predictable ones. However, not all currency pairs enjoy this behavior.
- Update: 5 Most Predictable Currency Pairs – Q3 2014
- Update: Here is the recent list for Q2 2014
- Here is the list for Q4 2013
- Here is a the list for Q3 2013.
Behavior of currencies changes over time: the first quarter of 2013 has seen a significant rise in volatility, which will probably continue in Q2. Volatility certainly has an impact on predictability. Here is an updated, ranked list for for the most predictable currencies in Q2 2013, with details about each pair’s characteristics.
- EUR/GBP: This cross advances to the top spot after demonstrating excellent separation between ranges as well as consistent channel trading. Also note the two “shooting stars” seen in Q1. The range of pips in this cross isn’t huge, but the ongoing troubles of the euro-zone (Italy, Cyprus) are expected to provide more volatility in this cross, which often reflects a flight to safety from euro-zone issues, or a calm when things improve.
- AUD/USD: The bigger picture shows wide range trading, and when looking closer, we can also observe how the pair respects both rising and falling channels. The actual turn in direction in March was accompanied with false break (sends the pair one place lower) but also with a hammer pattern. This behavior could also be repeated on the topside in of the wide range in Q2.
- GBP/USD: Cable can be a violent pair and erratic pair, but the recent drop below the weekly support lines has certainly helped it in improving its respect for ranges. The improved behavior will likely continue more towards the end of the quarter: when Mark Carney takes the helm as governor of the BOE.
- USD/JPY: The choice may be somewhat surprising, as the pair is usually a tough one to trade, and its behavior hasn’t been too good in Q1 2013. However, the waiting for the new composition of the BOJ is over: the new leadership will begin making decisions in April and we shall see if they can resume the yen’s downfall or disappoint and push it higher. Volatility is critical for the pair’s behavior.
- NZD/USD: Kiwi continues to respect ranges quite well. Upon a breakout, it tends to mark the top (or bottom) of the range, and stick to it for some time. While the behavior hasn’t been optimal, it still remains a relatively good pair.
One major pair is absent from the list: EUR/USD is certainly fascinating in the past few months, and as aforementioned, the ongoing issues in Europe will likely provide lots more action. However, the pair has suffered and will likely suffer false breaks. There’s too much going on in the US and in Europe. It is not an easy pair.
For reference, here is the previous list for Q1 2013.
Further reading: 50 Top Forex Twitter Accounts