While exploring the web, I found an informative article relating to currency correlation as well as how to trade currency crosses in a much better way. I am sharing this article for review of BP Community
Currency Pairs Correlation in Forex Market: Cross Currency Pairs
I am pasting an important extract from the said article so that you may get an overview about the whole article.
Another Important Example:
If EURUSD goes up and GBPUSD goes down at the same time, EURGBP goes up strongly.
Maybe this is the most important case that we can trade based on this rule.
It happens many times that EURUSD and GBPUSD move against each other and that is the best time to trade EURGBP.
Now you know why EURGBP doesn’t move strongly most of the time.
It is because EURUSD and GBPUSD move in the same direction most of the time.
For example, they go up at the same time.
Therefore, EURGBP doesn’t show any significant movement, because when both of the currencies of a currency pair go up or down at the same time, that currency pair doesn’t show any strong movement and direction.
I hope you know why a currency pair goes up or down.
It goes up when the first currency’s value goes up OR the second currency’s value goes down.
For example, EURUSD goes up, if Euro value goes up or USD value goes down.
If this happens at the same time, then EURUSD goes up much stronger.
The below chart includes almost all of these unusual movements and their impact on the third currency pair.
if EUR/USD and USD/JPY then EUR/JPY means if EUR/USD and USD/JPY go up at the same time, then EUR/JPY goes up much stronger.
