Five most predictable currency pairs.

1) AUD/USD: The Aussie dollar has been in the top rankings of predictability for several years, and for good reasons. This currency pair tends to travel in uptrends and downtrends which are easily defined, and when it moves out of them, the change of direction is abrupt and clear.

Moreover, the Aussie is the best “risk currency,” enjoying a strong correlation with stock markets. It has recently been less correlated to Chinese data – and that is good news, as figures from the world’s second-largest economy tend to cause confusion. Locally, the Reserve Bank of Australia refrains from big surprises, also allowing traders to react to Australian figures. 

2) USD/JPY: This currency pair had its spells of frustrating and uneven range trading, but that is not the case anymore. It respects support and resistance lines more than it used to and its recent higher trading ranges mean that it is now having its moment. 

Fundamentally, USD/JPY has a robust correlation with US bond yields and remains the best pair to trade US data.

3) USD/CAD: The loonie had been an afterthought for traders, yet its appeal in reaction to Canadian data puts it on the list. When a top-tier figure comes out, the C$ reacts slowly, providing a level-playing field for retail traders to jump onto the trade. 

Technically, USD/CAD has a good memory for old support and resistance lines, even when oil prices jump out of range. Its respect of more recent lines is somewhat weaker.

4) NZD/USD: The kiwi is a good pair to trade technically, as one that makes significant breakouts, and runs to the next support or resistance line to stop there. However, it has been having its share of false breaks.

5) EUR/USD: The world’s most popular currency pair is trickier to trade and requires more experience – as it has many moving parts. On the other hand, once the trader becomes aware of the pair’s tendency to make an initial false break, trading EUR/USD is somewhat easier. 

Concluding thoughts.

It is essential to be aware of the technical and fundamental predictability of currency pairs – and watch their evolution as well. Forex trading is never a one-way street, and knowing when to drop a currency pair that has lost its predictability.

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