Not all currency pairs behave in the same manner: the better ones will slow down when approaching a clear line of support or resistance and will then bounce back. With enough momentum, the pair will break the line and never look back. These pairs are the more predictable ones. However, not all of them tend to follow technical rules that closely.
Updates:
- 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.
And as seasons change, so do markets: some become more predictable, while others lose touch with charts. Many factors impact this behavior. Here is a ranked and updated list for Q1 2013 of the top 5 pairs, with each pair’s characteristics.
- AUD/USD: The pair might change its direction in Q1 2013 and drop, but it isn’t likely to change in its predictability: it trades in a clear and wide range. Moves within the range were within clear channels, and when these were broken, the impact was clear to see. Stability in China has lowered the volatility but not the predictability. We could see an uptick in volatility in Q1 2013, something that will certainly help technical trades on the Aussie.
- EUR/GBP: This popular cross trades very nicely within channels and it has advanced from the third to the second place. The pair tends to check out the limits of the channels before making a big bounce to the other direction. With the UK following Europe in muddling along and with nasty moves in GBP/USD, this pair provides a more smooth ride, especially with the limited trading ranges.
- USD/CHF: This seems like a surprising choice, as the SNB maintains a floor of 1.20 under EUR/CHF and the moves in EUR/USD therefore determine the moves in USD/CHF. Nevertheless, this pair behaves in a better manner than all the others mentioned here. Ranges are determined quite nicely, and when a breakout occurs a new trading range is found and traded in. This behavior is likely to continue in Q1, assuming the European debt crisis continues in its current form: managed but not resolved.
- NZD/USD: The kiwi falls from the second place after some choppiness – the pair finds it hard to adjust to the high levels. Nevertheless, it is still a very interesting pair which tends to mark the range upon a breakout, and stay within this range for a period of time.
- EUR/AUD: Another euro cross closes the list. Long term limits and channels are generally respected, especially on the upside. Both currencies used to trade in tandem, but each has developed its own direction. Together they work quite nicely and will be interesting in Q1.
One major pair missing from the list is EUR/USD: the world’s most popular pair is almost OK, but not good enough. It has too many false breakouts. The number of risk factors on both sides of the Atlantic is a bit too much.
Another major pair that is missing is USD/JPY: the pair soared in Q4 but didn’t always respect technical lines, even though it was one of its better quarters. Traditionally, this is a problematic pair.
For reference, here is the list for Q4 2012.
What do you think about this list? Do you agree? Disagree? What are your favorite pairs?
Further reading: 50 Top Forex Twitter Accounts
Get the 5 most predictable currency pairs
36 Comments
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Good stuff. Agree that AUDUSD is heading down, AUD infact looks to be falling across the board. There is more confidence in EUR now and I expect it to strengthen against it’s main counterparts – EURNZD long in particular could be one of the best trades of 2013 with high likelyhood of reching 1.7500.
Thanks! EUR/NZD is certainly another interesting pair.
Yes. I thought I was the crazy one. The Eur/Usd is now going to become one of the most unstable pairs in the world because both have sooo many unaddressed problems. Leave this pair to the daytraders. And yes the USD/JPY has caused me loss after loss by trying to use daily bars to swing trade it and get even a 4 or 5 day run out of it, BEFORE it explodes out of nowhere when its already overbought like is happening now. Yes, this pair especially since we dont know when ABE and BOJ will turn off the faucet, well, play these currencies but not against each other. Just like the EURO, I am loving how so many currencies are changing the trend around. But why wouldnt I short the EURO with the CAD and AUD, strong reliable currencies with better interest rates. Why would I short the Euro using the USD? NO REASON TO. nEWS COULD BREAK OUT ANYTIME AND HAVE IT SWING ION ANY DIRECTION FOR DAYS. *Sorry for all the caps,but my keyboard took over the computer.
In fact The Euro short with NZD ,AUD,CAD,JPY have made me such quick money these past several days, why would I want the EURO/USD pair. We are going to see some jaw dropping charts develop on this pair for 2013. Why not just sit back, enjoy the ride and watch? Unless you enjoy jumping onto a moving train, have you taken out obver and over again at BE…and you have to keep jumping back in no matter which way you go. This is a brokers “spread delight.” pair.
Thanks for your comment. Interesting insight
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I have been following AUD/USD as well for a long time because of its high predictability. Although I do believe it’s headed downward in the short run, I think it will eventually come back up and break above its all-time high. Perhaps it won’t happen this year because RBA is likely to lower its interest rate at least in the first half of the year.
Thanks for your very interesting comment!
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