Currency Correlations

Have you ever seen currency correlations go all wonky and not follow their usual patterns? Like, when things get all topsy-turvy and what you expected to happen doesn’t quite line up with reality?

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Currency correlations aren’t permanent. For example, they may be positively correlated for months, and then become inversely correlated. Understanding why the change requires understanding the current market context.

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Pretty much this, which many forget.

Correlation can be broken in the short-term as well. For instance, typically, EUR/USD and XAU/USD tracks together. However, when news of the war broke out, EUR/USD went south while XAU/USD went on a north trip.

You have to understand why pairs are co-related, not just follow the “co-relations” blindly.


Correlations could change indefinitely. Sometimes it’s hard to identify what is the root causes. Especially, when I cannot find the leader currency at the moment. My opinion is better step away for a bit at these moments until you can understand and able to adapt the situation again.

We’re in a changing situation with currencies right now. I have them in the following order, strongest at the top -

EUR is rarely leader and rarely for long, so I expect USD and CHF to take 1st and 2nd within a week. NZD should fall towards AUD which will fall further - CAD will be bumped up the order as they drop and could climb higher if oil prices rise again. GBP to bump along in the middle of the pack.


makes me feel a bit queasy, in principle, to be honest :stuck_out_tongue_closed_eyes:

i’d be more comfortable, that way … :yum:

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Wait…what has this got to do with correlations, lol!

USD CHF JPY are safe havens and usually together.
NZD AUD and CAD are usually together.
GBP does its own thing.

That’s the normal correlation and what tommor is saying he expects, but it often breaks like now with JPY nowhere near anything else.

XAUUSD and EURUSD are not correlated at all. They’re both against USD, so that’s not really a correlation as much as both showing USD performance. Gold and USD are both safe havens, EUR is not. That’s why they diverge on war.

It is wrong to say that XAU/USD and EUR/USD are not correlated at all. Under normal circumstances unaffected by the equities market and war, they do have corelation. XAU/USD is heavily affected by DXY and the major component of DXY happen to be…

Look at charts more than this year. Gold is on a 9 year uptrend, EURUSD is on a 15 year downtrend. Since 2015, gold is up about 40% and EURUSD down almost 25%.

They’re not correlated and the current correlation that you think you see is borne out of a freakishly strong USD and gold crashing as markets close in on some form of normality after a crazy few years.

This is the point somebody above made, correlations aren’t permanent and can change depending on the market dynamics. Gold and USD are both safe havens, EUR is not. So long term correlation will always be weak.

This usually happens, especially if you don’t track the news.
It’s quite a frequent situation when your analysis show you one picture, then you open the order, missed some crucial news, and the market reverses right in front of your face.
As for the correlation of currencies, then it exists, for sure. As far as I know major currencies are interconnected, because when there’s a dramatic upheaval due to some events, then they start behaving very unpredictably, as you said, topsy-truvy begins.