I think that most people who are doing Forex choose currency pairs according to their strategy and method. I think that I am doing short-term trading, long-term trading, trend following, scalping, day trading and many viewpoints and methods. Each currency pair has its own unique characteristics. However, all of them have a common tendency regarding currency pairs between neighboring countries. This time, I am writing about the characteristics of currency pairs between neighboring countries and the habit of price movements.
Currency pairs between neighboring countries
Currency pairs between neighboring countries are characterized by being prone to range markets. All of them have the characteristics that gaps are hard to be created and price ranges are hard to take. Therefore, people who are fighting with trend-following tactics cannot easily win. The feature is that the price range is hard to be created without long-term trading. Why is it easy to get into the range market?
Strong economic ties
Since they are neighboring countries, they are closely related economically and politically. Therefore, the price movements are very similar, and it has the property that the price range is hard to be created. Therefore, both currencies are affected in the same way even if there are major movements in economic indicators. This is true of politics as well, and both are affected in the same way.
Price movements of currency pairs between neighboring countries
Here are some examples of how currency pairs between neighboring countries will move in concrete terms.
AUD/NZD
A combination of Australian dollars and New Zealand dollars. The following is the weekly chart as of February 2022.
Both the Australian dollar and the New Zealand dollar are closely related to China and are greatly affected by China’s political and economic conditions. Furthermore, until 1966, both countries used the Australian pound and NZ pound, which are linked to the pound market. The economic relationship is strong at the level where there was talk of currency union before.
From the perspective of long-term investment, the chart moves, so you can get a price range, but it is difficult to get a large price range in about a week.
The difference between Australia and New Zealand is that Australia is a resource-rich country, while New Zealand is an agricultural country. If there is a large price range for this currency pair, the price range will only increase when the price fluctuations of crude oil and iron ore become large.
EUR/GBP
It ’s a combination of euro and pound.
The pound is a little more dominant these days due to the rise in the pound’s interest rate, but it still tends to be less likely to have a large price range compared to other currency pairs. Although the UK left the EU in 2016, it has a strong correlation as it was a member of the euro before that.
From the perspective of long-term investment, the chart moves, so you can get a price range, but it is difficult to get a large price range in about a week. EUR / GBP is not suitable for scalping due to its weakness of wide spread.
When there is a gap between Britain and the euro, it is when some political or economic movement takes place within Britain. In this case the euro is less susceptible. On the other hand, if there is movement in the euro area, it tends to affect the pound as well.
USD/CAD
It is a combination of US dollars and Canadian dollars. The chart below is the weekly chart as of February 2022.
Since they are neighboring countries in North America, there is a strong economic and political correlation. From the perspective of long-term investment, the chart moves, so you can get a price range, but it is difficult to get a large price range in about a week.
The gap between the United States and Canada is when resource prices fluctuate. Canada, along with Australia, is one of the world’s most resource-rich countries and tends to have a range of prices when energy resources such as crude oil, coal and natural gas fluctuate.
If you want to take a price range, choose long-term investment
From the above, currency pairs between neighboring countries tend to be in the range and it is difficult to create a price range, so if you are investing, you will have to choose long-term trading.
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