Reactive trading and news trading - the strategies that are based on your interpretation of the events - are always a hot topic. While it is popular among cryptocurrency enthusiasts, who may have access to the best first-hand knowledge about the coins they are trading, it may be not the best strategy when trading Forex.
In this post, SimpleFX will introduce you to a currency pair that may suit traders that want to make decisions based on technical analysis, not news. In this case, you want to avoid the drama and forex mainstream. You don't want to trade pound sterling among the Brexit turmoil. You want volatility, strong trends with no prolonged consolidations on relatively high volumes - a choppy market trading sideways.
There is a currency pair that shares these features - it's AUD NZD called within forex lingo Aussie/Kiwi.
Both currencies are considered risk-on. This combination helps you avoid situations where a big economical or political event blows-up the strategy you built on the technical analysis. If you are trading a risk-on currency - like the Australian dollar or New Zealand dollar - against a risk-off currency that is considered a safe investment in times of high uncertainty - such as Japanese yen - you are prone to unexpected situations.
Trading two risk-on currencies at the same time make your trading strategy more robust.
On the other hand, both Australia and New Zealand have been able to stay away from the global headlines. There's hardly ever a top breaking news story about these markets.
As for the currency pair itself, it has all the qualities a day trader looks for. It is highly volatile (although not the most volatile pair there is, which may expect the relatively low popularity of Aussie/Kiwi).
As you can see in the 1D chart below AUD NZD trends strongly. There are very short sideways drifts in the pair, and most often you can identify them clearly as consolidation periods due to a lower trading volume.
AUDNZD is showing some serious volatility. Source: SimpleFX WebTrader
Strong trends are much easier to trade. Nevertheless, many forex traders choose pairs that are very tricky. Just take a look at the very popular EURUSD. You can see very long periods where the market is undecided and it is very difficult to make money trading at this time frame. These sideway trends are not obvious consolidations, so it's even more difficult to implement any trading strategy effectively.
The volatility is quite strong since the two currencies although in the same region don't correlate much. Being relative neighbors the two economies are perceived more like rivals big institutional investors can choose from.
One last but not least feature of the Aussie/Kiwi pair is the early timezone. If you are trading daily candlesticks from Europe, the Americas, Africa or the even Middle East, the news that may affect your strategy come very early in the cycle. You can adjust your positions if anything unexpected happens, which makes it an even more comfortable forex instrument for traders that want to focus on technical analysis rather than reactions to the news.
Trading EURUSD can be very tricky
Because of all the above characteristics, AUD NZD is a good pair to test your trading system, since there are not many external events that may blow up your otherwise sound trading strategy.
Trading in the products and services of SimpleFX may result in losses as well as profits. In particular trading in leveraged products, such as but not limited to, cryptocurrency, foreign exchange, derivatives and commodities can be very speculative. Losses and profits may fluctuate both violently and rapidly.
Editors’ Picks
EUR/USD rebounds to 1.1350 on modest dollar weakness
EUR/USD regained its traction after declining toward 1.1320 during the European session and rose to 1.1350 area. The dollar's is facing modest selling pressure amid falling US Treasury bond yields and allowing the pair to continue to edge higher ahead of the weekend.
GBP/USD struggles to pull away from 10-day low set near 1.3550
GBP/USD fell toward 1.3550 on Friday and touched its weakest level in 10 days. Although the US Dollar Index stays in the negative territory in the early American session, the risk-averse market environment doesn't allow the pair to stage a convincing recovery.
USD/JPY pares intraday losses to weekly low, down little below 114.00 mark
USD/JPY continued losing ground for the third straight day and dropped to a fresh weekly low. The risk-off mood benefitted the safe-haven JPY and exerted pressure amid sliding bond yields. Hawkish Fed expectations acted as a tailwind for the USD and helped limit any further losses.
Editors’ Picks
EUR/USD rebounds to 1.1350 on modest dollar weakness
EUR/USD regained its traction after declining toward 1.1320 during the European session and rose to 1.1350 area. The dollar's is facing modest selling pressure amid falling US Treasury bond yields and allowing the pair to continue to edge higher ahead of the weekend.
GBP/USD struggles to pull away from 10-day low set near 1.3550
GBP/USD fell toward 1.3550 on Friday and touched its weakest level in 10 days. Although the US Dollar Index stays in the negative territory in the early American session, the risk-averse market environment doesn't allow the pair to stage a convincing recovery.
Gold reclaims $1,840 amid falling US T-bond yields
Gold reversed its direction after testing $1,830 earlier in the day and turned positive on the day above $1,840. The benchmark 10-year US Treasury bond yield is losing more than 3% at 1.75%, fueling XAU/USD's rebound.
BTC may capitulate to $30,000
Bitcoin price has dropped considerably over the last three weeks. The recent downswing has made things worse for BTC and hints that a steep correction could be on its way.
Will the Netflix stock price rebound?
Netflix stock edged down after better than expected Q4 results. Will the Netflix stock price rebound? Expectations of rising subscription and higher prices are bullish for Netflix stock price.
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