Currency pairs vary significantly in three ways:
- Movement range
- Trade volume
Predictable currency pairs tend to have clear lines of resistance and support, leading to one of two cases:
- Clear breaks and leaving nothing behind them
- Decelerating and receding when they’re approached
And when the spectrum’s end has been reached, what are left are the unpredictable pairs.
Bear in mind that the predictability isn’t static, moving when the market changes and in the seasons. Here’s a look at the five more predictable currencies for the fourth quarter of 2015.
- This currency pair is often overlooked, but it trades quite well when turned toward a certain direction (down). It also has a nice trading range. The kiwi always hits new levels, marking the spot and then trading well within that range. The previous support the pair has had works as a resistance, and vice versa. On top of that, it’s got a great memory for lines. During the fourth quarter, chances are the current behavior is going to continue.
- The long-term currency favorite is the Australian dollar, topping the list several times in the past. It recently enjoyed double bottoms and hug on the round levels (think 0.70 and 0.75). It’s got a high trading volume and has the potential to become predictable, more so when it notes lower highs and higher lows, or moving down and moving up.
- The rise in this pair has taken many folks by surprise, but the predictability appears to be rather good. It’s a nice pair for people not really hungry for bells and whistles, but it does maintain strength when it comes to predictability. It’s similar to kiwi in that the pair will hit another level before it finds a range. While the direction could alter in the fourth quarter, the predictability would probably stay stable.
- This pair is all about bells and whistles, but it still likes the round levels. Its monetary policies tend to wander, yet it’s possible to see some range breakouts.
- This pair tends to have a lot of information tied to it, being that it’s the world’s most popular currency pair. However, it lost the number one position. During the fourth quarter, there was some serious uncertainty about the central banks that resulted in volatility and a limited amount of predictability. The assumption about the pair is that sooner or later a directional trade could test their support and resistance levels beyond the restricted variable ranges.
Do you trade with any of the five pairs? Do you agree with the list?
- GBP/USD – while the cable appears to be moving quite often, it’s still rather erratic; more so since the BOE is dependent upon the Fed.
- USD/CAD – this pair is constantly breaking new ground but doesn’t have any real respect for the previous levels.
- USD/JPY – this is like the “hugging” levels, and its behavior isn’t near as predictable as the Aussie dollar’s.