The RSI or the Relative Strength Indicator is a momentum indicator like the Stochastic Charts and is an extremely popular tool for determining trend patterns and deciding on entry and exit points in the market. Here is a strategy, to find the best currency pair by using Relative Strength Index to have maximum benefit by using this method.Firstly, select one currency as main which is stable in all pairs. Here, I chose USD as main currency. The time frame which I used in this example is daily and using the default setting for RSI which is typically 14.
The currencies with their daily RSI are explained as follow:
  • (you can see USD is stable in all pairs)
  • (note, We must consider that, those pairs which USD is the main must be subtracted by 100)

  • AUD-USD = 47.27-------------------- AUD = 47.27
  • EUR-USD = 59.33-------------------- EUR = 59.33
  • GBP-USD = 53.97-------------------- GBP = 53.97
  • NZD-USD = 56.97-------------------- NZD = 56.97
  • USD-CAD = 79.80-------------------- 100 - 79.80 = 20.2---------------------- CAD = 20.2
  • USD-CHF = 37.45-------------------- 100 – 37.45 = 62.55-------------------- CHF = 62.55
  • USD-JPY = 36.58--------------------- 100 – 36.58 = 63.42-------------------- JPY = 63.42
  • USD-ZAR = 85.09-------------------- 100 – 85.09 = 14.91-------------------- ZAR = 14.91

Next we chose the weakest and the strongest currencies relating to their RSI. In this example the weakest is ZAR with RSI (14.91) and the strongest is JPY with RSI (63.42). So our best pair is ZAR-JPY (with RSI 16.67 and the most oversold one). As you know, an asset is deemed to be oversold once the RSI approaches below the 30 level, meaning that it may be getting undervalued and is a good candidate for a pullback.

finally, The overbought & oversold indications of the RSI don’t always give the true Forex market picture because the RSI (a non-trend following indicator) and the market trend share an inverse relationship. So whenever the market exhibits a strong trend, the RSI loses its value and vice versa, which leads to inaccurate overbought or oversold market indications based on strong or weak market trends. The RSI is an oscillator and therefore works best in an oscillating market. Never use RSI as the sole strategy for making trading decisions. it will be more effective if it comes with other indicators, patterns, divergence and other analysis. this strategy is like a map to chose your currency pair and further analysis are essential.
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