Five most predictable currency pairs, technically and fundamentally, ranked

  • Currencies that are more predictable tend to respect technical rulebooks generally behave logically. 
  • AUD/USD, USD/JPY and USD/CAD stand out with both technical and fundamental textbooks.
  • NZD/USD and EUR/USD have been improving in their technical behavior.

Not all currency pairs are born equal – not in the spreads brokers offer on them, nor in their volatility and nor in their predictability. What makes a pair predictable? When the price approaches a significant support or resistance line, such a currency pair would either slow down and eventually turn around – or make a clear break and leave dust behind it.

On the fundamental front, a currency pair that is more predictable moves persistently in response to data, its central bank refrains from big surprises, and it is less prone to headlines. 

Five most predictable pairs

1) AUD/USD: The Aussie dollar has been in the top rankings of predictability for several years, and for good reasons. This currency pair tends to travel in uptrends and downtrends which are easily defined, and when it moves out of them, the change of direction is abrupt and clear.

Moreover, the Aussie is the best "risk currency," enjoying a strong correlation with stock markets. It has recently been less correlated to Chinese data – and that is good news, as figures from the world's second-largest economy tend to cause confusion. Locally, the Reserve Bank of Australia refrains from big surprises, also allowing traders to react to Australian figures. 

2) USD/JPY: This currency pair had its spells of frustrating and uneven range trading, but that is not the case anymore. It respects support and resistance lines more than it used to and its recent higher trading ranges mean that it is now having its moment. 

Fundamentally, USD/JPY has a robust correlation with US bond yields and remains the best pair to trade US data.

3) USD/CAD: The loonie had been an afterthought for traders, yet its appeal in reaction to Canadian data puts it on the list. When a top-tier figure comes out, the C$ reacts slowly, providing a level-playing field for retail traders to jump onto the trade. 

Technically, USD/CAD has a good memory for old support and resistance lines, even when oil prices jump out of range. Its respect of more recent lines is somewhat weaker.

4) NZD/USD: The kiwi is a good pair to trade technically, as one that makes significant breakouts, and runs to the next support or resistance line to stop there. However, it has been having its share of false breaks.

Fundamentally, NZD mimicks AUD in responses to stock market moves, but the Reserve Bank of New Zealand likes surprises more than its peers in Canbera. That lowers its ranking.

5) EUR/USD: The world's most popular currency pair is trickier to trade and requires more experience – as it has many moving parts. On the other hand, once the trader becomes aware of the pair's tendency to make an initial false break, trading EUR/USD is somewhat easier. 

Recent uncertainty has been surprisingly positive for the pair, and that will likely last for a while.

What currencies failed to make the list? GBP/USD is just too choppy and is prone to the odd Brexit headline. USD/CHF is prone to intervention from the Swiss National Bank – some traders and brokers will never forget the 2015 "SNBomb." The franc may be a safe-haven for investors, but not for traders.

Concluding thoughts

It is essential to be aware of the technical and fundamental predictability of currency pairs – and watch their evolution as well. Forex trading is never a one-way street, and knowing when to drop a currency pair that has lost its predictability is critical. 

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