Changing Currency Correlations - Possible Strategies
We update the currency correlation tables and charts on weekly basis. Because of the characteristics of economies and their interdependence or the lack of it, various currency pairs tend to maintain some correlation or again a lack of it. But again there are times of turmoil when economic uncertainties are high and volatility becomes unpredictable. Such are the times when the currency correlations tend to behave abnormally and away from their average ranges. Such times present the opportunities to enter the market for making a trade. This is done with the expectations that sooner or later the market will tend to normalize and the average ranges of the correlation values will be back in the picture.
Considering this, it is always good to keep a track of the changes in the correlation values of major currency pairs while trading in Forex. The idea is to observe some sudden and big changes in the normal behavior of any two specific currency pairs which normally have some strong positive or negative correlation. When such big change from the average range of correlation between those two pairs take place, then enter the trade with the pair with higher volatility.
In this section we will bring the changing correlation values where we can compare the weekly averages with the monthly and yearly averages to see some sharp changes. We will cover the following currency pairs:
Currency Correlation Tables And Charts