The Trend and Range Bound Foreign Exchange Rates

This article looks at the trend and range bound foreign exchange rates that you can trade.

Foreign Exchange Rates Cross Currencies

When you trade the foreign exchange rates you have to consider whether you are looking at a trend or range bound rate.  It is important that you know this because it can affect the trading that you complete with the foreign exchange rates.  A trend bound rate will need to be traded in a different manner to the range bound foreign exchange rates.  There are a number of points that you should consider when you look at these currencies.

The Major Foreign Exchange Rates

The best place to start when you look at the foreign exchange rates is the currency pairs that you are looking at.  Of the major currency pairs there are certain ones that are more likely to trend then to range.  This is due to the movements that you usually see with the currencies that make up the pair.  The more liquid the currency in the pairs the more likely they are to trend.  Of course, this is not always the case because there are certain liquid currencies that are considered to be range currencies.

The Long-Term Movements

When you look at whether the currency pair is range or trend bound you should consider the long-term movement.  The long-term movement of a currency pair will give you a general idea about the overall movement of the market and what you can expect in the short-term.  There are many traders who do not consider the impact of the long-term on the short-term trading that they are looking at.

The long-term movements of the market have a major impact on the trading that you can do.  If the long-term movement of the currency is trending then you are more likely to find trends in the short-term.  However, if the long-term movement is more range bound then you are more likely to find range movements on the short-term.

The overall movement of the market determines what the short-term movement is going to be.  You cannot have a trend in the market when the overall movement is range bound.  This will cause the overall market movement to change from range to trend because the price channel will be broken.

The Impact of Commodities

When you look at trend and range bound currencies you should consider whether or not you are using a commodity currency.  When you use a commodity currency the prices of different commodities will impact the movement on the forex market.  In terms of trends and ranges the commodity currencies are more likely to trend.  This is due to the impact of the commodity price and the fact that the commodities are constantly traded.

The Use of Cross Currencies

There are a number of currency pairs that are known as cross currencies.  If you are looking for a range bound currency pair then these are the ones that you are most likely to use.  The cross currency pairs are any currency pairs that do not include the US dollar.  One of these currencies that are considered the best range bound currency pair is the Euro and Swiss Franc currency pair.



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