We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Bullish
USD/JPY
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Bitcoin
Bearish
More View more
Real Time News
  • The $CAD rose on a hopeful tone from the Bank of Canada, but the largest risk to the central bank’s outlook remains unresolved. NZD/CAD has rallied. Will AUD/CAD follow as CAD/JPY sinks? Get your market update from @ddubrovskyFX here: https://t.co/AairskIHA5 https://t.co/f53ZzloW4u
  • The latest UK General Election opinion polls continue to show the Conservative Party holding a strong lead over Labour and point to Boris Johnson winning a working majority in Parliament. Get your $GBPUSD market update from @nickcawley1 here: https://t.co/qF04EOUWkI https://t.co/LNl4bXbnpp
  • Recent polls have put Conservatives ahead of Labour and given a boost to $GBP. Get your #Brexit update from @ZabelinDimitri here: https://t.co/l2n53C0cYY https://t.co/oTWfXkaDDt
  • What are the truths and myths of #forex trading? Find out from @DailyFX analysts here: https://t.co/uF75VPzstr #FOMOintrading https://t.co/xeromAGqqx
  • Macro data from around the world have long attested to the urgent need for a trade settlement between the US and China. Increasingly the corporate numbers are saying the same. Get your market update from @DavidCottleFX here:https://t.co/Qon7QUO80c https://t.co/rCOG78QQ2M
  • #Gold prices may fall while the US Dollar gains even as economic policies championed by the Trump administration invite inflation. Get your market update from @IlyaSpivak here: https://t.co/4lHhHsby56 $XAUUSD https://t.co/JmZxckVHdS
  • Cable (GBP/USD) remains just off its seven-month high print around 1.3165 as traders start to move to the side lines ahead of next Thursday’s General Election vote. Get your $GBPUSD market update from @nickcawley1 here: https://t.co/CpCh13J9ZH #Brexit https://t.co/PIh6WUqbsK
  • (Weekly Technical Outlook) GBP/USD, EUR/GBP, GBP/JPY, GBP/CAD Outlook as UK Election Looms $GBPUSD $EURGBP $GBPJPY #UKelection2019 - https://www.dailyfx.com/forex/technical/article/fx_technical_weekly/2019/12/07/GBPUSD-EURGBP-GBPJPY-GBPCAD-Outlook-as-UK-Election-Looms.html?CHID=9&QPID=917702 https://t.co/iuILHYczJ7
  • Why do you require consistency in trading and why does it matter? Find out: https://t.co/WlEFlluGfZ #tradingstyle https://t.co/TkMtJQKatx
  • By issuing debt denominated in $USD, China is making a long-term bet that it will be cheaper to pay back its loans over time in the US Dollar; it believes the value of the US Dollar will fall. Get your market update from @CVecchioFX here:https://t.co/5GO9UrvO4y https://t.co/xV9urXXf48
Forex Correlations (March): How Do Currencies Trade In Relation To Each Other?

Forex Correlations (March): How Do Currencies Trade In Relation To Each Other?

2010-03-25 15:18:00
John Kicklighter, Chief Currency Strategist
Share:

The following is our monthly correlations update for March.  As we have stated time and again, correlations between different currency pairs will inevitably shift over time. Therefore, it is of utmost importance to keep abreast of these fluctuating relationships to fully understand your trades and portfolio.  Below are the one-, three-, six- and twelve-month correlations for the seven major currency pairs.  Additionally, we have included the monthly trailing correlation for the majors against the EURUSD for a different view of correlation.

 
In order to be an effective trader, it is important to understand how different currency pairs move in relation to each other (and in conjunction to other markets).  There are a few reasons why this is significant, but most importantly, it allows traders to understand their net exposure. However, it is worth noting that aside from a few standout correlations (negative and positive) amongst the majors; the relationships in price action across the majors has generally dissipated in recent weeks and months. This is an unmistakable consequence of tempered volatility and curbed risk appetite trends. Through this period of stability and merit-based positioning, traders are more selective of where they place their money and are less prone to foster strong correlations. Yet, as soon as primary trends and dominant fundamental drivers return, the trading ties will quickly return. Given the recent stability recently established in key currencies (like the US dollar, Japanese yen and euro), it may seem that this disassociation can persist indefinitely; but threats running from a Chinese asset bubble to a default within the European Union are too prevalent not to exact a forceful influence on investor attitudes one way or the other. 
 
Looking for standout associations amongst the majors, the latent impact of risk appetite trends is still exceedingly clear across those pairs that are particularly sensitive to risk appetite trends. This is the reason that the correlations amongst the commodity bloc (USDCAD, AUDUSD, NZDUSD) are so severe. However, there those pairs that stray from the traditional high yield differential category and still exhibit an extraordinarily high level of correlation. Perhaps the strongest connection can be drawn between the price action of EURUSD and USDCHF. This is a unique situation whereby the economic and policy links between the Swiss and Euro Zone economies create a fundamental equivalency that creates something akin to an arbitrage situation when the two are mispriced. Hence the strong negative relationship between EURUSD and USDCHF price action over the past month (-0.97). Alternatively, the strong 0.81 correlation between EURUSD and NZDUSD over the past month would seem to part with conventional wisdom. However, speculation over the stability of Greece this past month has exacerbated the euro’s dependency on strong risk appetite and thereby leveraged the greenback’s appeal as a source of stability in both pairs. 
 
Furthermore, as evidence that the influence of dominant fundamental trends like risk appetite wax and wane with time; we can point to the 1 month trailing correlation between EURUSD and USDJPY. Through February, the two showed a statistically nonexistent relationship (0.09). However, through December, the two would more frequently move in opposite directions (with a correlation quotient of -0.42) as the market would seek liquidity rather than simply act to repatriate carry funds (which find capital flowing to the Japanese yen as surely as to the US dollar). 
 
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. 
 
FX Correlations (data as of 03/01/09)
1 
2
 
 
 

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.