What is a predictable currency pair? This is a pair that tends to respect lines of support and resistance: slowing down when approaching a significant level before backing down. And if the currency moves with full force, it will break that line, and will never look back. A previous level of support turns into resistance and the other way around. Every foreign exchange pair is slightly different., On the other extreme, we find choppy, frustrating and unpredictable currency pairs that are trouble makers for technical traders.
And like markets, nothing stays the same: some currencies improve their behavior while others just lose it. Seasonality, trends and other factors make the changes. Here is an updated and ranked list for Q2 2017.
- AUD/USD: The Aussie is coming back from down under. The pair behaves in a better manner when it is trending and now is the time to wake up. Lines of support and resistance immediately flip sides when broken, regaining their strength after breakouts. When in trend, the pair is likely to find its movements within clear uptrend and downtrend channels. Also when the pair is in range, its behavior is certainly positive.
- EUR/GBP: This cross is now also known as “the Brexit cross” as negotiations are set to begins. Various elections add fuel to the fire, and like AUD/USD, its behavior is better when it is trending. As this is a cross, we see longer periods of range trading within limited ranges, denying the cross the first place. However, EUR/GBP has a good “memory” for older lines.
- NZD/USD: Kiwi/dollar is making a comeback alongside its neighbor Aussie. Also here, we had a period of range trading that kept it out of the list, but this may be over. After breaking out, the pair marks the far end, and this defines the range. While not perfect, this minor pair has an above-average behavior.
- USD/JPY: This major pair is often overlooked by traders, but it is on the move again. Not all the lines are clear with dollar/yen, but those double bottoms and triple bottoms are dead serious: support, is support and a break is a break.
- EUR/USD: The world’s most popular pair closes the list for the second time in a row. It maintains its strong memory for old lines, including that 1.0340 line from 2003. However, caution is warranted around the French elections where technical levels could be forgotten. Also, it has a tendency, albeit lower than beforehand for false breaks.
What do you think? Is one of your favorites in the list or rather excluded?
Here are some important pairs that didn’t make it, with some explanations:
- GBP/USD: While EUR/GBP is high on the list, cable has become too erratic, and we could certainly see more “flash” moves and violent squeezes, especially given the elections in the UK. Moves were always relatively sharp in this pair, with wider stops needed.
- USD/CAD: While the trend seems to be to the upside, the pair is becoming more choppy. The OPEC deal comes to an end by the end of Q2, and more volatility could be seen, but this does not guarantee good technical behavior.
- USD/CHF: The Swiss National Bank intervenes in markets quite frequently, so it’s best to stay away from any franc cross.
Here is the previous ranking from Q1 2017
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