Top 5 Most Predictable Currency Pairs

Currency pairs different in their volume of trade, range of movement and predictability. The Most predictable currency pair pays respect to clear levels of support and resistance, either slowing down and retreating when approaching them or making a clear break and leaving only dust behind them. At the other end of the spectrum we have the unpredictable, choppy and frustrating pairs.

This predictability is not static and it changes as market conditions evolve and along with changes in seasons. Here is an updated and ranked list for the 5 most predictable currency pairs for Q4 2015, each one with its own style.

1. EUR/USD: There often seems to be too much information around the world’s most popular currency pair and it has lost its top position. In Q4, high uncertainty about both central banks could cause more volatility but only limited predictability. We keep it in the list on the assumption that things will become clearer sooner than later and more directional trade could see the pair testing support and resistance levels outside the limited choppy ranges.

2. AUD/USD: The Australian dollar is a long time favorite and has topped the list in the past. More recently it has enjoyed various double bottoms and also a tendency to “hug” round levels, such as 0.70 and 0.75. With even higher trading volume than in the summer in the northern hemisphere, AUD/USD has a great potential for predictability, especially when it marks lower highs (moving down) or higher lows (moving up).

3. NZD/USD: This often overlooked currency pair moves up to top the list. Not only does it trade nicely when it trends in a specific direction (down and this could continue) but it also enjoys very nice range trading. The kiwi breaks ground to new levels, marks the far spot and then trades nicely within that range. Previous support works as resistance and the other way around. In addition, it has an excellent “memory” for old lines, and now it needs them. In the fourth quarter, it is likely to continue enjoying this positive behavior, at least while liquidity is high, before Christmas.

4. EUR/GBP: The rise of this cross has surprised many, but the predictability remains quite good. This is a nice pair for those not hungry for lots of pips but it certainly maintains its strength in terms of predictability. Similar to the kiwi, the pair manages to mark the next level before settling in range. The direction could change in Q4, but the predictability could certainly remain stable.

5. GBP/JPY: Contrary to the previous pound pair, this one is wild on the pips, but it certainly likes round levels. With diverging monetary policies rocking the cross, we could see nice breakouts of ranges.

Are you trading these pairs? Do you agree or not with the list?

Some notes:

  • GBP/USD: Cable is moving quite a lot, but it’s likely to remain erratic, especially as the BOE depends on the Fed.
  • USD/CAD: is breaking new ground but doesn’t seem to really respect previous levels.
  • CHF: The ongoing intervention by SNB makes any Swiss franc cross quite unpredictable.
  • USD/JPY: While the pair also likes “hugging” levels, most recently 120, its behavior is far less predictable than the one of the Aussie.

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