Weekly correlation report – Who fell out of the line?

February 2, 2014 in Forex Analysis

CorrelationsAn eye on the Forex correlations is not only important to avoid contradicting trade positions but also as possible trading opportunities. A sudden exceptional change may indicate some trading opportunities. Overall the pairs tend to fall back into the normal range after any sudden change from the normal behavior.

Our weekly correlation updates which compare the past one year’s average correlation values to past one month’s average and past one week’s average is for the up-to-date reference for any exceptional changes from the longer time average currency correlations.

Let’s check which pairs fell out of the alignment during the past week

  • EUR/USD and EUR/GBP: The average correlation during the last 1 year has been negative between these currency pairs. It was not strongly negative but can be considered as fairly negative with -43. The last week witnessed a sudden change to a very strong correlation of 0.96 between these two pairs.
  • EUR/JPY and AUD/USD: The past one year’s average has been rather string negative with a correlation coefficient of -0.76. During the last week this pattern turned the corners to bring a positive correlation of 0.52.
  • EUR/JPY and EUR/GBP: The average correlation coefficient during the last one year has been negative. The exact value has been -0.59. The average of the last trading week showed a sudden change to make it a very strong positive one i.e. 0.92. Is something wrong there?
  • USD/JPY and AUD/USD: Another pair of currency pairs which fell out of the normal patterns have been these two. The strong negative correlation average of past one year i.e. -0.80 turned to a strong positive 0.72.
  • USD/JPY and EUR/GBP: Here we go again. This pair namely EUR/GBP seems to come out as a winner among the candidates who are not behaving well. The past year’s average has been +0.54. Last week’s average was -0.73.
  • GBP/USD and EUR/GBP: Last 1 year’s average has been -0.81 and last week’s was +0.91.

Who have been behaving well?

  • EUR/JPY and USD/JPY: Practically going hand in hand with the year’s average as 0.92 and last week’s average of 0.91.
  • EUR/USD and USD/CHF: These two currency pairs have also not been coming out of their disliking for each other. The year’s strong negative correlation has been -0.97 and during the last week it was -0.93.
  • EUR/JPY and USD/CHF: These two also maintained their average. Last one year has seen a positive 0.73 and last one week came out as 0.73.

We would pick EUR/GBP and AUD/USD as the main pairs to keep an eye on. In fact EUR/JPY may slow down the fall also.

Do keep an eye on the daily correlation updates at:

  1. EUR/USD correlations
  2. GBP/USD correlations
  3. USD/JPY correlations
  4. EUR/JPY correlations
  5. AUD/JPY correlations

The above tables covers a number of other currency pairs.

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