It’s been said before that different currency pairs have individual characteristics, rather like personalities, and that each must be individually studied and analysed to be traded profitably. At this time, near the close of a momentous forex trading year, that’s even more true than normal.

Although this spring’s massive sell-off, dominating markets from mid-September to early November, appears to have abated, the usual end-of-year illiquidity has not occurred and many currency pairs continue to flaunt robust volumes. Despite this aberrant behaviour pattern, some semblance of normalcy is returning to forex trading, although the twin and interrelated themes of risk aversion and safe-haven flows remain strong.

Some currency pairs continue to be rangebound, for example, USD/CAD, which has not successfully forced itself through strong resistance at the 1.3000 level. AUD/USD faces an equally stiff challenge at 0.7050. Both of these export currencies are currently dominated by commodities prices, with USD/CAD in particular following the lead of crude oil.

AUD/NZD remains one of the best behaved currency pairs, consistently respecting support and resistance levels as shown below on the four-hour chart:

Note that the support and resistance lines were drawn between March and August 2008 when AUD/NZD first climbed these stairs to its high of 1.2966 on 24 July. They held up well to testing on the flight down and continue to hold true at present.

For those interested in following this story, these levels are:
1.0900 in bright yellow at the bottom of the chart
1.1300
1.1420
1.1600
1.1725
1.1815
1.1940
1.2075
1.2175
1.2275 and
1.2325

There are of course multiple intermediate levels in between; however, these dominate this pair’s current trading.

Although NZD/USD is not quite as well behaved, its current range is also well-defined if large, stretching 900 pips between 0.6100 to the upside and 0.5200 at support, with intermediate levels of 0.5535, 0.5490, 0.5575, 0.5800, and 0.6025. Below is the four-hour chart illustrating this pair’s behaviour:

This growing normalcy has not extended to the most liquid of the majors, EUR/USD, nor its correlated satellite, USD/CHF. These two currency pairs continue to be shoved about by the headlines of each day as well as global equities markets, and until USD and the economy it represents stabilises, that’s not likely to change.

The Japanese yen remains dominant amongst currencies and USD/JPY continues to slide ever lower. Its current level is around 900 pips above its nadir of 79.75, touched in April of 1995 following a five-year bearish trend that culminated in G7 action to support USD. With the prices of Japanese and other Asian goods set to rise as one direct result of the strong yen, a continued decline in USD/JPY will push Japan into an even deeper recession as exports slow further.

Against the Euro and the Aussie, the yen appears to be levelling off albeit at ugly levels. While EUR/JPY has broken above its consolidation triangle, best seen on daily charts, it remains beneath strong resistance at 125.80. AUD/JPY, the very definition of the carry trade, has lost 37% in the year and shows a range between 57.50 and 63.50 since late November, although declining volumes here may signal further stabilisation.