Ok so when fundamentally the USD get stronger it seems the EUR always gets weaker, is that correct? They are negatively correlated on the USDX and EURX daily charts, will they always be like that? I’m learning fundamentals right now, been trading mostly of technical, figure why not learn fundamental for max profits :43:
The dollar index is a weighted average security: 57.6% Euro, 13.6% JPY, 11.9% GBP, CAD 9.1%, SEK 4.2% and CHF 3.6%. Although that correlation has slight breaks at times, they are basically negatively correlated. This means that when one is making a higher high, the other should be making a lower low. Some traders look for cases where that correlation breaks down and use that as one piece of evidence that manipulation is taking place. This is a good thing to learn about (divergence of correlated and negatively correlated markets. The percentages above can change, and I know I changed the way I listed them about halfway through. The important thing I think is to understand divergence. There are many different ways to use divergence in your trading. Very interesting divergence on the daily on Monday of the Mini S&P and the Mini Dow, which are positively correlated.
Admittedly this does not work every single time, but I think it’s an excellent tool and it is telling a story about what is happening in the market. Check out AUD/USD and NZD/USD on various time frames as well.
More often than not, that is the case. However, there can be cases when both EUR and USD are strengthening, keeping EURUSD in consolidation while other euro or dollar pairs are making strong moves.