Not all currency pairs behave in the same manner: the better ones will slow down when approaching a clear line of support or resistance and will then bounce back. With enough momentum, the pair will break the line and never look back. These pairs are the more predictable ones. However, not all of them tend to follow technical rules that closely.
Updates:
- Update: 5 Most Predictable Currency Pairs – Q3 2014
- Update: Here is the recent list for Q2 2014
- Here is the list for Q4 2013
- Here is a the list for Q3 2013.
And as seasons change, so do markets: some become more predictable, while others lose touch with charts. Many factors impact this behavior. Here is a ranked and updated list for Q1 2013 of the top 5 pairs, with each pair’s characteristics.
- AUD/USD: The pair might change its direction in Q1 2013 and drop, but it isn’t likely to change in its predictability: it trades in a clear and wide range. Moves within the range were within clear channels, and when these were broken, the impact was clear to see. Stability in China has lowered the volatility but not the predictability. We could see an uptick in volatility in Q1 2013, something that will certainly help technical trades on the Aussie.
- EUR/GBP: This popular cross trades very nicely within channels and it has advanced from the third to the second place. The pair tends to check out the limits of the channels before making a big bounce to the other direction. With the UK following Europe in muddling along and with nasty moves in GBP/USD, this pair provides a more smooth ride, especially with the limited trading ranges.
- USD/CHF: This seems like a surprising choice, as the SNB maintains a floor of 1.20 under EUR/CHF and the moves in EUR/USD therefore determine the moves in USD/CHF. Nevertheless, this pair behaves in a better manner than all the others mentioned here. Ranges are determined quite nicely, and when a breakout occurs a new trading range is found and traded in. This behavior is likely to continue in Q1, assuming the European debt crisis continues in its current form: managed but not resolved.
- NZD/USD: The kiwi falls from the second place after some choppiness – the pair finds it hard to adjust to the high levels. Nevertheless, it is still a very interesting pair which tends to mark the range upon a breakout, and stay within this range for a period of time.
- EUR/AUD: Another euro cross closes the list. Long term limits and channels are generally respected, especially on the upside. Both currencies used to trade in tandem, but each has developed its own direction. Together they work quite nicely and will be interesting in Q1.
One major pair missing from the list is EUR/USD: the world’s most popular pair is almost OK, but not good enough. It has too many false breakouts. The number of risk factors on both sides of the Atlantic is a bit too much.
Another major pair that is missing is USD/JPY: the pair soared in Q4 but didn’t always respect technical lines, even though it was one of its better quarters. Traditionally, this is a problematic pair.
For reference, here is the list for Q4 2012.
What do you think about this list? Do you agree? Disagree? What are your favorite pairs?
Further reading: 50 Top Forex Twitter Accounts