Forex Correlations - Your Trading Edge - USDCAD H1

Forex Correlations - Your Trading Edge - USDCAD H1

19 April 2015, 17:11
Venkat ramana

Forex Correlations - This week Trading USDCAD,H1

This week we look at another currency pair  USDCAD,H1 which was one of the most trending pairs.  I have plotted  Forex correlation indicator  with all major correlations  pairs on the indicator chart. We  see USDCAD H1 currency pair trending downward this week . As you can see USD(Red line)  was weaker and falling and was below CAD (Blue line)  plotted as a baseline for ease of viewing. Hence, we would go short and the short position  closed out on Friday.

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.

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