A predictable currency pair will make a convincing follow through after breaking a clear technical barrier, or hesitate and bounce off. A less predictable currency pair will trade choppily and frustrate the technical trader. Some currency pairs are consistent with their behavior, while others change over time.
Evens in markets, periods of the year and many other factors impact the various pairs. Here is an updated and ranked list of the 5 most predictable pairs for the last quarter of 2013, each with its special style.
Update: 5 Most Predictable Currency Pairs- Q4 2014
Update: 5 Most Predictable Currency Pairs – Q3 2014
Update: Here is the recent list for Q2 2014
- EUR/GBP: Upon a breakout, the cross tends to run to a specific point and immediately mark the new trading range. Apart from range trading, it recently traded in a nice downtrend channel. The current trends in the euro-zone and in the UK are likely to continue and support the channel, making this cross attractive also in Q4. It’s worth looking also at round numbers on the opposite cross: GBP/EUR.
- NZD/USD: The kiwi usually appears on the list, and this time it got upgraded. The higher volatility adds quite a few pips to the relatively predictable moves. The attempts of the central bank to verbally intervene are being ignored more than beforehand, and this makes trading somewhat more natural. Breakouts tend to be clear and strong.
- EUR/USD: The world’s most popular pair had a nice technical behavior in Q3, creating both a double bottom and making a nice clear breakout above uptrend resistance. It certainly lived up to its No. 1 ranking in Q3, but things are likely to change in Q4 with more “moving parts” and uncertainty (especially around Germany) than beforehand, that could create choppier trading. Nevertheless, this pair is still better than many others, with support and resistance lines working quite well. The pair remains better in range trading than in breakouts.
- USD/CAD: This usually sleepy pair demonstrated nice downwards moves in Q3, making a nice break below uptrend support. It’s directional trade is not bad, but range trading needs improvement. It tends to respect old support and resistance lines and not necessarily more recent ones.
- AUD/USD: The Aussie topped the list in the past but now only closes the list. It still trades in good trends, but tends to make a few more false breaks than beforehand. In Q4, it is likely to continue looking for a direction. Looking at the past, it has better chances to become more predictable during Q1.
Do you trade any of these pairs? Do you prefer others? What are the most predictable currency pairs in your opinion?
Who didn’t make it? The Swiss franc is still limited in movement due to the floor the SNB imposed under EUR/CHF. USD/JPY had a nice period of time, but it is now directionless and choppy. Two contradicting channels can be drawn on the charts.
GBP/USD had a good run, but it still remains “the currency of the devil” with too many nasty moves. Recently, the pound tends to work better with other currencies such as the euro, Aussie, kiwi and also the yen, but doesn’t behave well with the greenback.
For reference, here is the list for Q3.
Further reading: How to use the Average True Range (ATR) day trading forex