Currency Correlations?

Hello everyone,

I know that the EUR/USD is strongly correlated to the USD/CHF, but what about the other pairs? How are they correlated?

Also is it possible to use the correlations to your advantage? For example, if the USD/CHF moves faster in one direction, can you put an order in the opposite direction for the EUR/USD?

Thanks for your help!

You should check out Forex Correlation - Mataf

It breaks down currency correlation for many pairs.

Kathy Lien’s new book “Day Trading the Currency Market” also has a really good section on currency correlations.

Useful graphic info about correlations: - Correlations

Another good link for looking into correlations is Oanda’s FXCorrelations.

Using a regular forex broker you will have no real chance of taking advantage of any movements in pairs at the tick level. You need to be able to react to the ticks as they happen. It might allow you to better guage the momentum or activity in the correlated pairs, but arbitrage traders will have eliminated any potential for you to profit from small pip moves.

For some further reading I would recommend finding out what happens when you try and make money doing a true hedge with three currency pairs: The Impeccable Hedge, also known as Triangular Arbitrage.