Forex Correlations - This week Trading EURUSDH1
This week we look at another currency pair EURUSDH1 which was one of the 3 most trending pairs. Other pairs being GBPUSDH1 and NZDUSDH1 could be traded on the short side. I have plotted a dynamic Forex correlation indicator with all correlations and another indicator below showing just EUR, GBP, NZD & USD plotted for ease of viewing. We see EURUSDH1 currency pair was one of the pair trending this week . As you can see EUR (light blue line) was weaker and falling and was below USD (Red line) plotted as a baseline. Hence, we would go short EURUSDH1 chart and the short position open till the close of session as the price was also below the custom built indicator plotted on the price chart.
Forex Correlations - Background
To be an effective trader, it is important to understand how different
currency pairs move in relation to each other so traders can better
understand their exposure. Some currency pairs move in tandem with each
other, while others may be polar opposites. Learning about currency
correlation helps traders manage their portfolios more appropriately.
Regardless of your trading strategy and whether you are looking to
diversify your positions or find alternate pairs to leverage your view,
it is very important to keep in mind the correlation between various
currency pairs and their shifting trends. It is clear then that
correlations do change, which makes following the shift in correlations
even more important. Sentiment and global economic factors are very
dynamic and can even change on a daily basis or even hourly basis. Strong correlations today
might not be in line with the longer-term correlation between two
currency pairs.
Wishing my readers a happy and prosperous 2015 Trading.
Happy Trading - Get Your Trading Edge
