What Currency Pairs to Focus on


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Video Transcription:

Hello traders. Welcome to the news trading course and the first module, “The Economic Calendar.” On this lesson, we are going to learn what currency pairs to focus on when we are waiting for a news release. Now, this is very important because if you don’t choose the correct currency pair, you might not get the desired reaction in the market. This means that sometimes, some currency pairs are going to react more poorly than others when it comes to news release and the reason is that we need, first of all, to look for the most traded currency pairs and where the volume actually is. If the currency pairs that we want to trade with the news release are truly liquid, then it’s not going to work for us and it actually might backfire.

So, the first thing we’re going to do is we’re going to go through what currency pairs to focus on. And of course the currency pairs that we are going to pick to trade these news releases are the major currency pairs and we are going to avoid any exotic pairs.

forex pairs to trade the news with

If we take the nonfarm payrolls announcement for example, we know that these are job numbers from the US. So, the currency impacted is the US dollar, okay? So, that’s the first step. You go to the Economic Calendar and you look the currency that the news release is impacting. And of course in this example, because we are taking as an example the job numbers from the US, the currency impacted is the US dollar. Then we need to figure out which currency pairs to trade the news with. And this for every single news release that we have to trade and this means that if we are looking at an interest rate change in Great Britain, then the pound is going to be impacted, so we need to pick the correct pound pairs to trade this news with, okay? Now, this is going to be like an overall rule for these scores. For US dollar, we would choose to trade the Euro/US dollar, the GBP/USD and/or the US dollar/Japanese Yen. Some people will say that you can also trade the Aussie/US dollar but in my opinion, the best currency pairs to trade US dollars with are the Euro/US dollar, the GBP/USD and the USD/Japanese Yen.

For GBP data, we are going to use the GBP/USD and the GBP/Yen. And you can see that there’s an asterisk here on the GBP/Yen, and the reason I have noted these currency pair is because you are going to trade a GBP data with the GBP/Japanese Yen only when you feel comfortable trading the news because the GBP/Yen is a monster and a bad trade, can and will dent your account. We will trade Japanese Yen news with the US dollar/Japanese Yen pair and the Euro/Japanese Yen. This is very basic. There are other Japanese Yen pairs such as the Aussie/Yen or the New Zealand dollar/Yen but these are too exotic and too liquid, and the best moves you . . . We are going to see the best moves of these two currency pairs, okay?

News trading on MT4

We are going to jump to a chart and I’m going to show you the difference in pips with the currency pairs that we have chosen and other currency pairs that we have left behind. For Aussie data, we will only trade the Aussie/US dollar. The other Aussie dollar pairs are too liquid. Now, if you feel like you have to trade Aussie data or New Zealand dollar data, just choose the Aussie/US dollar and the New Zealand/US dollar to trade this news. Let’s face it. Some traders out there are going to teach you or are going to try to tell you that, for instance, if you are looking at a US data release, you can trade four currency pairs at the same time and make an excellent amount of pips. But in this course, we are going to teach you that this is wrong. You have to choose one currency pair to trade a data with, and if you’re going to make money on four currency pairs on a move that is volume and momentum ignited, you might as well just choose one currency pair and have full control over one trade than try to multi-task, and maybe lose some pips here and there.

Now, we’re going to go to the MT4 platform and we are going to look at the nonfarm payrolls announcement of last week on four different currency pairs. Okay, so this is my MT4 platform, and as you can see we have the five-minute US dollar/Canadian dollar, the five-minute GBP/USD, five-minute chart on the US dollar/Japanese Yen, and the five-minute chart on the Euro/US dollar, and they are all centered at the nonfarm payroll release. And first of all, we are going to focus on range. The US dollar/Canadian dollar gave us a range of 98 pips, GBP/USD a range of 100 pips, USD/Japanese Yen a range of 60 pips and the Euro/US dollar a range of 110 pips. So, as you can see, the best range was given by the Euro/US dollar. The worst range was given by the US dollar/Japanese Yen. So, just by thinking of range, we might disregard the US dollar/Japanese Yen for nonfarm payrolls.

Now, not only we need to focus on ranges, but we need to focus on the cleanness of the moves. And just by looking at these charts, the Euro/US dollar gave us the best and cleanest move to the downside and then a recovery to the upside when we hit these levels of support. The worst move is the US dollar/Canadian dollar because you can see that a huge rejection candle of about a 60 or 55 pips, which is half of the range that the US dollar/Canadian dollar gave us during the news release. So we can disregard the US dollar/Canadian dollar for nonfarm payrolls and another nice move was on the GBP/USD, you can see that we had a spike prior to the news then the news came, and then we move to the downside and then when we hit this level of support, we found buyers to move price up. So, this is how you’re going to go through every single time, well, not every single time, but at first, try to figure out which currency pairs to play with and when it comes to US dollar news, there’s more alternative than when it comes to Aussie dollar news, for example. But still, this is the currency pairs that you are going to be focused on when we have a news release.

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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