Over the years I have traded countless currency pairs. On a daily basis, I review most Australian Dollar, Canadian Dollar, Swiss France, Euro, Japanese Yen, Great British Pound, Norwegian Krona, New Zealand Dollar, Swedish Krona and US Dollar pairs. I also occasionally trade some Mexican Peso, South African Rand and Hungarian Forint pairs. You name it, I have likely traded it at some point over the last decade.
Currencies behave differently. Price action is universal but some currencies have their own "characteristics" and "personalities". Knowing how different currencies and currency pairs behave can obviously give you a trading advantage. In this post, I will share some insights into how different currencies behave...
Price action is reliable and forms on the charts of all currency pairs and time-frames. Some currencies behave differently to others though. Knowing these differences can obviously help a trader when making decisions, especially when it comes to entry signals and risk management.
Please keep in mind that this is all down to my personal experience from trading the 1 hour, 4 hour and daily charts. Lower and higher time-frames may behave differently.
Australian Dollar (AUD)
My biggest returns over the last 8 years of Forex trading have been on Australian Dollar (AUD) pairs. Especially on AUDCAD, AUDJPY and EURAUD pairs. I believe this is mainly due to the fact that price action on Australian Dollar pairs is reliable and precise. Australian Dollar pairs often also respect indicators and tend not to have unexpected volatility. 95% of my analysis is price action based and I use common trading indicators, such as the 50 and 100 SMA's and 14 period RSI, making the AUD a perfect currency to trade.
If you are based in the UK or Europe, you will need to keep in mind that most economic events for Australia will happen overnight. This can result in added risk as large overnight news driven candles can form.
Something to note; AUDNZD can be a nightmare to trade due to the correlation between the Australian Dollar and New Zealand Dollar pairs.
Top Tips; great for price action, steady pairs, big moves can happen overnight (UK & European time)
Canadian Dollar (CAD)
Another currency with clear price action - AUDCAD is actually one of my favourite pairs to trade, due to both the AUD and CAD being technically reliable!
Canadian Dollar pairs can form some big swings, create opportunities to make strong returns.
Most currencies are positively correlated with other currencies but the Canadian Dollar is positively correlated to OIL. Meaning that it is wise to keep an eye on OIL related news and price movements
From my experience, the Canadian Dollar seems to be more reactive to news events than other currencies, especially news that relates to trade balance, rates and employment data. This could be due to the fact that CAD news is usually released during the European and US trading overlap, when both European and US traders are trading.
Top tips; reliable price action, can be volatile, positively correlated to oil
Swiss Franc (CHF) and Japanese Yen (JPY)
I have paired these 2 currencies together as they can behave similarly. These pairs have 2 main characteristics that should not be ignored...
1. They are risk-on, risk-off currencies. This means that when there is economic uncertainty, the CHF and JPY can strengthen due to traders using these currencies as a safe-haven for investment. When global economies perform well, investment can move from these currencies, causing them to weaken. Because of this, Swiss Franc and Yen pairs often react to market news, even if the news if not directly related to the currency. For example, a US GDP figure can move CADCHF and AUDJPY. This can also mean large and odd moves on CHF and JPY pairs when news is directly related, such as movement on GBPJPY when a UK rate statement is released or movement on USDCHF when US employment data is released.
2. As both pairs can be heavily news driven, both pairs can be very directional - price can just keep dropping or rising, despite any signals of being overbought or oversold. I have seen rallies and drops that totally ignore support and resistance and any overbought/sold RSI. It is not uncommon to have 10 + candles that all close in the same direction.
Top tips; can be very directional, can react to global news events
The Euro (EUR)
The Euro is steady. Price movements are generally fairly slow when compared to other currencies. A new trader should always consider trading Euro pairs first. This does not mean that Euro pairs do not become volatile, because they do.
EUR pairs such as EURAUD and EURCAD can provide reliable technical analysis.
The EUR is positively correlated with Pound Sterling, so EURGBP can provide some odd price action at times. The EUR is also correlated with the CHF, meaning that this pair can be choppy - EURCHF is one of my least favourite pairs to trade!
Top tips; great for beginners, I much prefer the Euro lower time-frames to the Euro higher time-frames.
Great British Pound / Sterling (GBP)
I like to compare the Pound to the Euro but with a bit more kick. Daily movements are usually more volatile and market movements can be stronger. Pairs like GBPCHF, GBPJPY and GBPNZD should be left to traders that are more experienced as they can be very volatile.
The GBP pairs can provide a wide range of trading opportunities for a trader that is based in Europe or a late night trader in Australasia.
Top tips; clear price action, major swings, wide range of trading opportunities
Krona Pairs (DKK, NOK, SEK)
If you want to give yourself a heart attack or early grave, the Krona pairs may be what you are look for. Danish Krona, Norwegian Krona and Swedish Krona pairs can move thousands of pips per day and are often very directional i.e they will rally or fall for days. Price action is often respected but markets can be choppy. These pairs react strongly to news events.
Top tips; trade with small position sizes, use wider stop losses, can provide high-risk high-reward trades
US Dollar (USD)
The US Dollar is a great all-rounder. It has clear price action, respects indicators, can have big swings and is often active.
US Dollar pairs seem to range more than other pairs (on lower and higher time-frames). If you are a range-bound trader, these pairs could provide great trading opportunities.
Just like the CHF and JPY, the USD can be used as a safe-haven currency.
Top tips; great all rounder, Euro and US Dollar pairs would provide a great foundation for newer traders
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