Today’s strategy has a challenging goal. We want to spur contribution from our readers to participate in a global project that aims to collect as many currency AND currency pair characteristics as possible.
Every currency pair has its own specific behavior, movement, and (tiny) detail that traders recognize and understand as their experience level grows. In fact, focusing on trading currencies and pairs a trader knows intensively can provide a winner’s edge. Here is an approach to currencies by Warren Buffett.
Understanding the product you are trading in more depth than others gives you home court advantage. You are on the right website if you are interested in learning more ‘secrets’ of pairs and currencies. Below you will find a list of features. They are either common knowledge or behavior I have noticed.
This list is far from complete. Please feel free to add your experiences and thoughts to the list by writing a comment below.
PAIR #1 EURUSD
It isn't a secret that the EURUSD attracts the biggest trading volume in the Forex market. Therefore, it is the biggest pair with the lowest spreads available. A few observations:
- The EURUSD is heavily impacted by news events such as the NFP, FOMC, quantitative easing, Eurozone struggles.
- Most of its movement is made during the London session, but it typically does not make a ton of movement in a day.
- Its daily range is about average.
- I have noticed that the EURUSD likes to keep pushing in one direction for most of the trading day and that the pair often prefers deeper Fibonacci levels.
PAIR #2 GBPUSD
The GBPUSD commonly spikes up and down. It is well-known for its volatility and big movements. Observations:
- The Cable makes the most movement during the London session;
- During the London open it likes to make spikes up and down and often encounters false breakouts;
- Price likes to challenge support and resistance;
- GBPUSD often retraces to deeper Fibonacci levels like the 78.6 and 88.6;
- Its daily range is usually quite high;
- It’s a pair that likes to make spikes against the trend and in those cases, it is, therefore, an interesting pair to trade against the momentum;
- On many trading days, there is a GBP news event which heavily impacts this pair and the market can remain quiet till the news event is over;
- The pair is heavily impacted by news events such as the NFP, FOMC, quantitative easing, Eurozone struggles.
- I have noticed that the start of the reversals is often very choppy, corrective and slow.
PAIR #3 USDJPY
The USDJPY is another pair that is heavily impacted by the big US Dollar news events. Observations:
- When the USDJPY is in a consolidation, it can really slow down tremendously and the range often is ultra small;
- When the USDJPY is in a major trend, it usually continues in that trend with no major or large pullback. It keeps pushing and pushing and only pauses for a smaller bear or bull flag break;
- In a trending mode, the typical Fibonacci levels for the USDJPY are 23.6 and 38.2 Fibonacci retracement levels.
PAIR #4 AUDUSD
The AUDUSD is the opposite of the GBPJPY or GBPUSD as it’s more of a slower mover. Observations:
- Price will keep pushing in one direction but will frequently face pullbacks before continuing with the trend;
- The Aussie news event often has a big impact on Aussie pairs;
- The AUDUSD is a pair that moves quite a lot during the Asian session, but also moves decently in London and New York sessions;
- The Aussie currency is heavily tied to commodities, Australian exports, and Chinese economic data (such as import, export, and manufacturing);
- The AUDUSD is therefore also known as a “risk off-risk on” currency pair. With risk-on the AUDUSD price goes up, with risk-off the USD is in demand and the AUDUSD goes down.
PAIR #5 EURJPY
- The EURJJPY moves a lot of pips as well: more than the USDJPY but less than the GBPJPY;
- It is more suitable for all types of traders;
- The EURJPY often has chart patterns such as the bear flag and bull flag on its chart.
PAIR #6 GBPJPY
- The GBPJPY moves a ton of pips and has massive volatility;
- In fact, the GBPJPY is probably on average the pair with the biggest movements and its nickname the Ferrari refers to its speed of movement;
- It is not a recommended currency pair for traders who just started trading.
PAIR #7 EURAUD AND GBPAUD
- These currency pairs are big movers as well and roll up and down quickly;
- These currency pairs often are in trending mode which lasts for quite a long time.
PAIR #8 USDCAD
- The USDCAD is nicknamed the Loonie, apparently because of its crazy moves up and down;
- The volatility is not that drastic in my opinion but can pick up with oil-related news events.
PAIR #9 USDCHF
- There is historically high correlation with the EURUSD;
- The "Swissy" often increases in value when there is a "flight to safety."
PAIR #10 EURGBP
- The EURGBP is a slow-moving pair on average with low levels of volatility;
- But despite the lower movement, it does have occasional nasty spikes.
Please add to this post your thoughts, comments, tips, tricks, and more down below.
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P.s. Oh and don’t be scared to share your wisdom on any of the pairs or currencies as people who will read this blog are not going to cause your edge to disappear – the market is too big for that. Here is another strategy on how to apply technical analysis step by step. Leave a comment below with interesting things you have noticed with pairs and currencies!
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