Guest Post by ForexTraders.com
By nature, traders, forex or otherwise, can be creatures of habit. That is if we find something that works, we stick with it until it stops working. As it pertains to forex trading, this includes the pairs we trade. Many forex traders get into the game and focus on just one or two of the major pairs. This strategy is acceptable for beginners, but as your acumen increases, it might be a good idea to start looking for other pairs to make some pips. Rookie forex traders often focus on the Euro/US dollar (EUR/USD) and maybe one other major pair like the British pound/dollar (GBP/USD), but if you’re going to trade forex, you should be aware all of the opportunities available to you.
Two major pairs that tend to fall under the radar of a lot of forex traders are the Australian dollar/US dollar (AUD/USD) and New Zealand dollar/US dollar (NZD/USD). This is a shame because both the Aussie dollar and New Zealand dollar (also known as the kiwi) are two of most volatile currencies in the market and when traded properly, they can make traders a lot of pips. Your first order of business should be ensuring that your forex broker gives you access to these pairs. Most of the top forex brokers will as these are major pairs, but better to be safe than sorry.
Under current market conditions, the Aussie dollar and kiwi are definitely worth a look. Remember that as global equities rise, particularly US and Chinese stocks, risk appetite in the forex market increases and that means forex investors flee safe-haven currencies like the US dollar, Japanese yen and Swiss franc for riskier, higher-yielding assets like the Aussie dollar and kiwi.
In fact, several currency analysis reports have noted recently that the Aussie dollar is the most fundamentally sound of all the major currencies. Australia’s economy didn’t suffer during the global slowdown at the level that other major economies did and the Reserve Bank of Australia kept interest rates relatively high, which has served to bolster the Aussie dollar’s fortunes. The Aussie dollar is also a great for forex traders to get exposure to gold because as gold prices rise, so does the Aussie dollar because Australia is one of the largest exporters of gold in the world.
The kiwi is also worth watching due to its intense correlation to stock prices. You can bet that if the S&P 500 is making new advances the kiwi is performing well against the US dollar. The kiwi recently touched a year-to-date high against the greenback, but couldn’t hold the gains, but the NZD/USD should still be on your watch list either for a long trade or an easy short if stocks start to retreat. Kiwi also rises with commodities demand, even though New Zealand is not known for production or exports of any one commodity in particular.
The bottom line is if you’re going to trade forex, you should keep all of your options open and with current market conditions conducive to a bull run in the Aussie dollar, that currency should be at the top of your list.Get the 5 most predictable currency pairs