I’ve been trading for about a year with a friend now and we’re still not consistently profitable. We got wrecked many times using our current strategy, which led us to refine it to a point where we no longer get frequent signals, but once we do, they are indeed high probability. But, considering my life situation right now, I’ve managed to miss most winners the last month due to a side job (to pay the bills), but ofc managed to be there to take the losses.
This has led to immense frustration, where the solution I am now working on is simply adding pairs to my watchlist, and scout for my highest probable setups. But when adding pairs, the question naturally raised of how US news, especially the ones with the highest impact (FOMC, non-Fam etc), impacts other pairs that have no or little relation to the USD. For example, lets say that the FOMC news are way below expectations, and a heavy dump is followed on all USD/… pairs. How much will this affect pairs such as EUR/CHF, NZD/CHF, CAD/CHF or EUR/CAD EUR/JPY? Does it vary a lot? I am looking for pairs with a low impact of US news for the simple reason of diversification, and to still be allowed to trade without interruptions form the FEDs!
I’d recommend using the Compare option in TradingView to determine if the pairs you wish to trade are negatively (moving in the opposite direction) or positively (moving in the same direction) correlated with the US pairs. Correlation doesn’t always work because it tends to phase in and out over time, but it’s a good tool to have in the basket. It’s also great for finding divergences which can indicate possible trend reversals.
In forex trading there are only 8 major currencies, and high impact USD news affects everything else. USD is so important because of the size of the US stock market and the US economy but more importantly for us it is the currency in which cross-border trade in commodities is executed - so the basic building blocks of any economy or trade - oil, gas, metals etc. - are all bought and sold in USD.
So as @NeonCityFX suggests, it’s a good idea to track what the other 7 major currences are doing realtive to the USD. It would be an odd situation if you found you had a great sell signal on USD when the other 6 USD pairs are all USD buys.
The way I do this personally is to look at the major pair D1 charts with 50EMA. If price is above the 50, I give the base currency a bullish point and I give the counter currency a bearish points. So, the most bullish currency gets 7 points, the most bearish currency gets 7 bearish points and the currencies in between can be ranked in the same way. Right now, AUD scores 7-0, JPY scores 0-7 - so, it’s going to be unlikely I will be wanting to buy JPY any time soon. USD is very often 7-0 or 6-1, JPY is often 0-7 or 1-6: AUD is a yo-yo.
You’re spot on about US news messing with your watchlist, even when it seems like it shouldn’t. Think of it like a big ol’ domino effect. The FOMC meeting drops a bomb on the USD, and everything else gets shaken up, even pairs that seem chill and independent.
But hey, there are ways to dodge the FED’s dance moves! Here’s the lowdown:
Swiss Haven: The Swiss franc (CHF) is like a neutral party in the currency world. It’s strong and stable, so pairs like EUR/CHF and USD/CHF tend to stay calmer when the US throws a tantrum.
Aussie & Kiwi Buddies: Australia and New Zealand are tight like peanut butter and jelly. Their economies are similar, so AUD/NZD doesn’t get too rattled by individual country news.
Loonie & Yen Crew: The Canadian dollar (CAD) and Japanese yen (JPY) are also known for keeping their cool. CAD/JPY is a good option for avoiding the drama.
Remember, even these “chill” pairs can still get a little jiggy when the US throws a party. Diversification is your best friend, so mix and match different pairs to keep your trading smooth. And always keep an eye on the news, even if you’re not trading USD pairs directly.
