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 holds above 1.0450 German sentiment data
EUR/USD stays in positive territory above 1.0450 after retracing a portion of its bullish opening gap. The data from Germany showed that the IFO - Current Assessment Index declined to 84.3 in November from 85.7, while the Expectations Index edged lower to 87.2 from 87.3.
GBP/USD pulls back toward 1.2550 as US Dollar sell-off pauses
GBP/USD is falling back toward 1.2550 in the European session on Monday after opening with a bullish gap at the start of a new week. A pause in the US Dollar decline alongside the US Treasury bond yields weighs down on the pair. Speeches from BoE policymakers are eyed.
Japanese Yen refreshes daily low against USD; seems vulnerable amid BoJ uncertainty
The Japanese Yen meets with a fresh supply following an intraday uptick against its American counterpart, pushing the USD/JPY pair closer to mid-154.00s, or a daily top heading into the European session on Monday.
Editors’ Picks
EUR/USD holds above 1.0450 German sentiment data
EUR/USD stays in positive territory above 1.0450 after retracing a portion of its bullish opening gap. The data from Germany showed that the IFO - Current Assessment Index declined to 84.3 in November from 85.7, while the Expectations Index edged lower to 87.2 from 87.3.
GBP/USD pulls back toward 1.2550 as US Dollar sell-off pauses
GBP/USD is falling back toward 1.2550 in the European session on Monday after opening with a bullish gap at the start of a new week. A pause in the US Dollar decline alongside the US Treasury bond yields weighs down on the pair. Speeches from BoE policymakers are eyed.
Gold price manages to hold above $2,650 amid sliding US bond yields
Gold price maintains its heavily offered tone through the early European session on Monday, albeit manages to hold above the $2,650 level and defend the 100-period Simple Moving Average (SMA) on the 4-hour chart. Scott Bessent's nomination as US Treasury Secretary clears a major point of uncertainty for markets.
Bitcoin consolidates after a new all-time high of $99,500
Bitcoin remains strong above $97,700 after reaching a record high of $99,588. At the same time, Ethereum edges closer to breaking its weekly resistance, signaling potential gains. Ripple holds steady at a critical support level, hinting at continued upward momentum.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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