Can't get a hold of the majors? Maybe it's time for you to take a look at some cross currency and exotic pairs!
Cross currency pairs are pairs that do not include the dollar, while exotic currencies are those pairs that generally aren't traded by the majority of traders. Aside from the yen crosses, these pairs tend to get overlooked by traders because of their wide spreads and crazy moves. There are times however, when it pays to keep an eye out for some of these pairs.
Here are three pairs that could yield you some pips if you play them correctly:
Historically, the Aussie and the Kiwi have been highly correlated, not only because they're both comdolls, but also because of the trade and business that goes on between Australia and New Zealand.
This doesn't mean however, that the currency correlation is perfect and that trading AUD/NZD is a dead market. In fact, after trading as high as 1.3780 in March, the pair is now sitting just a few pips above the 1.2500 handle.
What caused that 1,200 pip decline? Interest rate expectations!
The New Zealand dollar has pushed ahead of the Australian dollar thanks expectations that the RBNZ would raise rates faster than the RBA. However, given the current environment, it starting to look like neither central bank will be raising rates any time soon. In fact, odds-makers in Vegas are saying that the RBA may even have to cut rates later this year. If that happens, we could see AUD/NZD head off for new lows.
If you're a position trader, this might be one pair that may tickle your fancy. It could turn out to be a great fundamentals play - just make sure your stop is wide enough to handle any wild swings!
EUR/CHF has actually been in the limelight recently, thanks to the SNB's proclamations of "pegging" the franc to the euro. After saying that it would keep the minimum rate of EUR/CHF at 1.2000, rumors are that the SNB now wants the peg at 1.2500. With the pair still hovering just above 1.2200, you might wanna start considering establishing a long position.
Keep tabs on that 1.2200 handle, which seems to holding as a solid resistance-turned-support line. Buying off bounces or breaks of psychological handles could prove to be profitable, at least until EUR/CHF hits 1.2500.
Lastly, here's a pair that I'm sure my friends over in Southeast Asia are gonna love - USD/SGD!
My, how the mighty have fallen! As recently as September 1st, USD/SGD was trading steadily at 1.2000. Three weeks later, the Singapore dollar has dropped about 8%, as USD/SGD has torn through a falling trendline, rising nearly 1000 pips and is currently knocking on the door of the 1.3000 handle!
Is this the beginning of a new trend?! Now that the long-term trendline has been broken, it might be time to start betting on a rise on USD/SGD. But instead of just buying now, it may be best to wait for the pair to pullback a bit and to enter at some Fibonacci retracement levels.
Now, if you aren't so familiar with these pairs but want to trade them, I suggest trading them on DEMO first. After all, each currency pair, whether it's a major, a cross-currency, or an exotic pair, has its own specific characteristics. Tight trading, unusual reactions to news events, and wild swings have come to describe such "weird" pairs and might be something that you aren't accustomed to. It may be best to trade these pairs on demo first before actually trying them out on a live account.
- 3 Things to Consider When Trading Yen Crosses 05:30 26 November 2011
- The Swiss Franc Before and After the SNB Rate Decision 05:28 17 December 2011
- 3 More Exotic Currencies To Add to Your Trading Basket 07:04 17 March 2013
- USD/JPY and EUR/CHF on Intervention Watch 05:08 01 February 2012
- Trading the May 2012 MPC Rate Decision 07:21 09 May 2012