Technical Analysis for Currency Pairs

Technical Analysis for Currency Pairs

Technical analysis of main currency pairs, such as EUR/USD technical analysis, is a set of methods for determining an optimal moment to open or close a position (or in other words, use «buy» and «sell» financial tools) with the help of the Forex price indicators. Therefore, the analysis of currency pairs is based on the analysis of price charts, trading volumes and other indicators of the Forex market.

The analysis of currency pairs involves 3 key points of view:

The first one says, “Prices take into account everything.” This phrase assumes that a Forex trader does not need to study the influence of external factors on the currency rate, since they are already taken into account.

The second point is, “The price is a subject to a trend.” It means that the change in the rate of exotic and major currency pairs follows a certain trend. Consequently, there are time intervals during which the rate steadily moves in one direction.

The third point of technical analysis is, “History repeats itself”. It implies that change in the rate of the most important currency pairs is cyclical, thus the trends are repeated. We can see it when conducting, for example, EUR/CAD technical analysis.

In general, the process of technical analysis of major currency pairs (such as the Australian dollar technical analysis) is based on identification of typical figures that occur on price charts and market volumes. After these figures are identified, a trader can determine how the course will behave in the future. However, to work with charts, you need to know some methods of technical analysis of currency pairs. That is why most traders use either ready-made forecasts published on the Web, or special programs to build forecasts themselves.

By the way, even a novice trader realizes that the movement of currency pairs has many features – correlation, volatility, time, etc. In this regard, it is very important to choose the right pairs for trading. In this article, we will try to find some specificity of currency pairs movement that may be useful in the trading process.

The choice of a currency pair (or pairs) is determined not only by individual preferences, but also by several other important factors. Let’s have a look at them:

Volatility is a range of fluctuations within the designated period (most often within one day). Volatility directly determines a trader’s trading strategy. If these are high-volatile GBP/USD or GBP/JPY, then you’d better use these tools for the trading strategy that was built for clear and strong movements – otherwise we may lose our deposit. Such pairs as EUR/AUD and EUR/CAD are usually calm, while EUR/USD remains unpredictable despite countless methods of EUR/USD analysis.

Each pair has its own period of activity. For instance, GBP/USD and EUR/USD are extremely active during the trading sessions in the USA and Europe. But their activity is low while the Asian trading session is on. Experienced traders recommend to trade currency pairs during the period of their maximum activity – as the most of trading signals are true this time. Since the market activity constantly changes, some of the major currency pairs move synchronously (or one after another).

As we can see, by using these features of currency pairs movement, we can somewhat increase the efficiency of our trade. But remember, it is quite difficult to trade several currency pairs at once. You may need lots of skills to control the instruments. Therefore, it is worth starting with one (or two) asset. And once you feel comfortable with trading, you can expand your arsenal.

Now let’s take a look at the characteristics of the currency pairs that are most used by traders.


This is the most popular pair – however, it is often hard to predict its movement. That is why beginning traders should use this option very carefully and always keep in mind that the results of EUR/USD technical analysis may be inaccurate and contradictory. Though, the EUR/USD news analysis may help.


This currency pair is very volatile. For some reason, many newcomers believe that the pound-dollar correlates with the euro-dollar as 1:1, but this is a huge mistake. This pair can become challenging for beginning traders. GBP/USD always reacts to economic changes and political events in the UK (even if they are only rumors). Hence, all the news should be thoroughly monitored.


This pair is quite predictable, thus the most of forecasts are correct. It also reacts very strongly to the economic and politic news.


This pair often repeats the dynamics of EUR/USD. That is why it is easy to predict and may become a good tool for novice traders.


This currency pair may be tricky. It is deeply connected with the dynamics of oil prices. If oil quotes starts rising, the Canadian dollar also moves up, and vice versa. Hence, it is important to monitor trends of the oil market. Also, this pair is not recommended for novice traders.


These pairs are very similar to each other, and both are strongly influenced by the cost of metals and weather conditions. If prices of metals falls or weather conditions are bad, their rates usually move down. If metals prices go up, the rates also rise. Hence, the AUD and NZD fundamental analysis is a must here. These pairs are good tools for beginners.


Both pairs are dangerous, as it is extremely difficult to forecast their behavior. Novice traders should not be engaged in trading these assets.


This pair usually has correct forecasts – thus recommended for beginners.


This asset may be the best one for beginning traders, as it is usually very calm. Trading this pair can significantly increase your deposit.


This currency pair often repeats the dynamics of the previous pair. But it is tricky, so it is better to be traded by professionals.


This asset is one of the calmest and most predictable currency pairs. Despite its low volatility, the cost of 1 point is relatively high against the size of the deposit – so be careful when trading it.


What conclusions can be drawn from this article? Before you build your currency trading strategy, you should pick a pair or pairs and thoroughly study all its features. Remember, that the very same strategy works differently with different currency pairs.