5 Most Predictable Currency Pairs—Q4 2014

10/09/2014 9:00 am EST

Focus: CURRENCIES

As markets change and evolve, so do currency pairs' behaviors, so Yohay Elam of ForexCrunch.com, highlights the five most predictable currency pairs for the fourth quarter of 2014 and the reasons why they have made the list.

Each currency pair has its own trading characteristics, with some enjoying a better technical behavior than others. A more predictable currency pair either slows down ahead of a clear support or resistance line, or conversely makes a convincing break leaving dust behind it. A less predictable pair has less respect for such lines and suffers from more choppiness.

And as markets change and evolve, so do currency pairs' behaviors. The leap in volatility seen in September is expected to continue through the fourth quarter and this change has certainly triggered a shake up in the list. Here is an updated and ranked list of the five most predictable pairs for the fourth quarter of 2014, each with its special style.

  1. AUD/USD: The biggest beneficiary from the stronger volatility is this pair that storms back to the top of the table. Respecting double bottoms (or tops) has been seen in Q3 and is likely to continue into Q4. It also went back to trading in nice channels making lower lows and lower highs to set out the downtrend. While it is unclear if the downtrend will continue, the technical behavior is certainly expected to stay high.
  2. EUR/USD: The world's No. 1 storms back to the list: it tends to breakout to new levels, mark the top or mostly bottom) of the new range and then to settle in for some nice range trading before making the next move. Also note that most (not all) of the breakouts allow enough time for trades to jump on.
  3. GBP/USD: While wider stops are needed in cable in comparison with the euro, the breakouts are very clear. If you can afford wider margins (perhaps with less leverage), this pair provides quite a few opportunities. The fact that the Scotland referendum is behind us takes away one of the uncertainties and pushes the pair higher on the list.
  4. NZD/USD: The turn to the downside has hit predictability in the kiwi's case, but the pair still remains on the list. The pair still has a good memory for veteran lines of support and resistance and it enjoyed slipping on a downtrend support line. While still a good pair, it isn't as good as it used to be.
  5. USD/JPY: This pair suffers long periods of slow and unpredictable movements and then some nice big ranges, even if the bigger picture is not always clear. We are now in a better period of trading that sees clear trending in one direction, hesitation, and then a change to the other direction. While respecting bottoms and tops needs some improvement (the 110 level is an example), the pair's false breaks can be utilized for taking the other direction.

By Yohay Elam, Founder, Writer, and Editor, ForexCrunch.com

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