Was looking at why some pairs seem to explode on ordinary headlines while others barely move, and it comes down to something more useful than memorizing which currency is which.
Currencies split into two functional groups, and geography is not the dividing line. Reserve instruments - yen, franc, dollar, gold, government bonds - get bought when the world gets more dangerous, because that is where capital goes to sit rather than to earn a return. Resource currencies - the Aussie, Canadian and Kiwi dollars - get bought when the world is producing and consuming more, since their economies export the stuff that demand is chasing.
That split explains cross behavior better than just calling a pair volatile. AUD/JPY has one currency from each side, so on a single risk headline both legs push the same direction and the pair moves hard both ways - it behaves less like a normal FX pair and more like a risk-appetite gauge. USD/JPY is reserve against reserve, so the two sides partly cancel on shock days and the pair tends to do less until the rate differential reasserts itself. USD/CAD is reserve against resource, which is why an oil collapse and a flight to the dollar were basically the same trade through 2020, and the pair moved so cleanly.
The part that actually changed how I size trades: the same lot size on different pairs is not the same risk. Over one stretch EUR/USD moved about 500 pips while gold moved about 3,400 pips in the same window - same account, same lot size, close to seven times the money at stake. A directional bias tells you which way, not how much of the account a normal week can move. That number lives in the instrument's own range, not in the account settings.
Anyone here size positions off each instrument's own historical daily range rather than a flat lot size across pairs? Curious how people handle CAD/JPY-type crosses where you are effectively holding two correlated risk factors at once.
(Went through this in more detail via ICF Market education material:
https://icf-market.net/education/fundamental-and-timing-analysis/reserve-and-resource-currencies)Linkback: https://www.forex.zone/forex-education/29/reserve-vs-resource-currencies-why-audjpy-isnt-a-normal-pair/5136/
