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  • Changes In Currency Correlations - Week Of January 6th 2014 0 comments
    Jan 11, 2014 11:47 PM

    An eye on any sudden changes in the correlation values is always important as it may provide a trading opportunity. The reason is simple that temporary major changes in the correlations may ultimately try to normalize to their longer-term averages.

    Let's check the EUR/USD correlations with some of the other pairs. The following data compares last week's average against past one year's average.

    EUR/USD correlation table

    (click to enlarge)

    (click to enlarge)

    The major changes are seen in the correlation of the following pairs:

    • EUR/USD with AUD/USD. The last one year's data shows negative correlation of -0.38 while during past one week these two pairs went into a strong positive correlation of +0.97.
    • EUR/USD with EUR/GBP: These two pairs again changed the direction from last one year's average negative correlation of -0.26 to positive correlation of +0.62 during last week.
    • EUR/USD with EUR/CHF: The direction changed from past one year's weak positive correlation of +0.24 to slightly stronger negative -0.59 during the last week.
    • EUR/USD and USD/JPY: The similar changes took place between EUR/USD and USD/JPY where a change from a week correlation of -0.37 to a stronger positive correlation of +0.72 was seen.

    What did not change?

    USD/CHF held it's strong opposition to EUR/USD with almost no change in the position. The very strong correlation between these pairs saw a minor change of -0.94 to -0.91.

    You may check more about correlation of currency pairs here.

    Connect with the author at Google: +Himanshu Jain.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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