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Old 04-25-2007, 09:30 AM
 

Join Date: Apr 2007
Posts: 2
Question Questions about currency pairs
Hi everyone,

Correct me if I'm wrong: say we have the EUR/USD pair and the GBP/USD pair and if the dollar is going down, then this means that the euro is going up (i.e buy euro) but it also means that the sterling is going up... or does it? And also is the EUR connected to GBP somehow? it must be since UK is in Europe right?
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Old 04-25-2007, 12:05 PM
Senior Member
  

Join Date: Mar 2007
Posts: 215
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Great question, sashko. This type of observation is what leads to better thinking about your own trading. Yes, there are positive and negative correlations between currency pairs. Unfortunately, there is really no short answer to this. Here is aother link to an article describing currency correlations:

Using Currency Correlations To Your Advantage
(I am not promoting this site or any other site. The link is posted for information purposes only.)

How will you fit this into your trading approach?
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Old 04-25-2007, 02:01 PM
 

Join Date: Apr 2007
Posts: 2
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Thank you all! I think i found the answer to my question:

Quote:
The example of strong positive correlation between two currency pairs is: GBP/USD and EUR/USD pairs. They have correlation coefficient of over +0.90, which means that when EUR/USD goes up, GBP/USD also goes up.
...from Forex Market Hours - Correlation

Now i see how this relates to risk diversification etc... hmm interesting, very interesting
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