If your currency pair breaks a significant support or resistance line, does it push through and make an impressive move? If the pair doesn’t break through, does it slow down when approaching such a line? If so, this is a predictable currency pair. Yet not all currency pairs behave this way, to say the least.
The recent drop in volatility changed the behavior of some currency pairs. Here is an updated and ranked list of the most predictable currency pairs for Q2 2012, with each pair’s characteristics. Let’s start.
Update: Here is the fresh list of most predictable pairs for the third quarter of 2012.
- USD/JPY: This is a huge shift from earlier periods. The pair stood out as a very frustrating one among majors for a very long period of time. Not only did it start moving upwards, but its choppiness also faded away. The pair now moves in clear ranges, forming both double tops and double bottoms. The good behavior isn’t only limited to the upwards moves, but is seen also in the corrections.
- NZD/USD: The pair changed its course from a steady and healthy rally to more range bound trading. While it lost the first place, the strong characteristics remain: resistance lines turn to support lines and vice versa and old lines are not forgotten over time. Tension around oil prices could divert attention from New Zealand’s agricultural exports and weaken the predictability of the kiwi. Yet so far, behavior remains very good.
- EUR/AUD: While both EUR/USD and AUD/USD are more choppy and less predictable now, the cross is moving quite nicely. This includes a rather clear separation between ranges: a breakout means a shift to another range. In addition, the size of the ranges are above the average for a cross, providing significant room for trades.
- GBP/USD: Cable closed the list last time, and its behavior improved since then. Nevertheless, stops should be wider here, and bottoms are better marked than tops here. The pair provides high volatility despite not making big long term moves.
- EUR/USD: The most popular pair closes the list. The higher intensity of the debt crisis but the lack of really big events has hurt the pair’s movements, limited the ranges a bit and made it more choppy. Nevertheless, support and resistance lines (at least those mentioned in Forex Crunch’s EUR/USD forecast) are still respected in a relatively good manner. Another deterioration in the debt crisis could push the pair lower of course, and also make the technical moves more predictable. For now, it appears on the list, but only at the bottom.
AUD/USD used to rank high in such lists, but it is absent now. As the Aussie lost some of its charm regarding the bullish moves, it also lost quite a bit of its good behavior. Australia’s economy is stuck between strong commodities and practically everything else. When the picture becomes clear to either direction, the technical behavior could improve as well.
USD/CHF is doing better. Nevertheless, it could switch to a very unpredictable pair within seconds: the sword of SNB intervention is definitely looming at all times.
What do you think? Which pairs do you find to be the more predictable ones?
For reference, here is the previous list for Q1 2012.