TRENDING:

XAU/USD

Silver

Correlations: Wide rangers, EUR, GBP, AUD, NZD

Brian Twomey Brian's Investment

Main problem to wide range currency pairs is correlations and explains small range movements. Further explains why USD Vs Non USD pairs , AUD/USD, NZD/USD and EUR/USD, trade and rise into severe overbought for the past 4 weeks.

A lost currency pair to correlations Vs its main counterparts in the universe such as EUR/AUD and EUR/NZD, won't perform, are sold and will trade in small ranges. Nobody wants a currency pair that doesn't contain a correlation.

Main problems to currency pair correlations is found between EUR and GBP and cross pairs. AUD/USD , NZD/USD and cross pairs are running perfectly on all cylinders. AUD/NZD and EUR/GBP are excluded from the list as we don't bother trading this pair.

A universe to EUR/USD for example contains EUR/USD, EUR/JPY and EUR/CHF while EUR/CAD is the midle pair and insight to the wide rangers EUR/NZD and EUR/AUD. EUR/AUD and EUR/NZD must contain at least a pulse to correlations and currently, it lacks any connection to EUR/USD.

The GBP/USD universe contains GBP/USD, GBP/JPY and GBP/CHF then GBP/CAD as middle currency pair and insight to wide rangers, GBP/NZD and GBP/AUD.

GBP/USD and EUR/USD operate and trade on 2 separate plains. The immediate first 3 currency pairs must contain high correlations in order to trade correctly and as 1 universe. Its not unusual to see negative correlations to main counterparts but it off kilter to see high negative correlations to the point of no pulse and underperformance to price movements.

EUR/USD Correlations V EUR/AUD -98 %

AUDUSD Vs EURAUD Correlation -99%

EURAUD is a lost price without a correlation. Means current price level is wrong and off sync to EUR/USD and AUD/USD. The proper scenario is to correlate to EUR/USD as its perfect counterpart.

AUD/USD Vs AUD/EUR correlate to 97% and runs perfectly. The lost correlation to EUR/USD VS EUR/AUD traveled to AUD/USD and AUD/EUR. A correlation at +1 and minus 1 exists in markets and can't ever leave and the level of the correlation rises and falls with the currency price relationship.

GBP/AUD

GBPUSD Vs GBPAUD Correlation +48%

AUDUSD Vs GBPAUD -96% GBP/AUD better correlated to GBP/USD but again explains small range movements.

EUR/NZD

EURUSD Vs EURNZD Correlation -85%

NZDUSD Vs EURNZD -96%

EURNZD Current price is unresponsive to EURUSD and NZDUSD

GBP/NZD

GBPUSD Vs GBPNZD Correlation +32%

NZDUSD Vs GBPNZD Correlation -94% GBPNZD slight Pulse to GBPUSD but extremely low correlation

GBP/CAD

GBPUSD Vs GBPCAD Correlation +51%

USDCAD Vs GBPCAD Correlation +39%

What’s wrong with Wide Range Currency pairs is correlation at current price is either to high or low Vs Counterparts

GBP/USD Vs USD/CAD

To Judge how overall currency markets are performing vs 2 exact opposite currency pairs

GBP/USD Vs USD/CAD minus 37%. This relationship at 37% isn't terrible but a better performing price relationship to wider movements between GBP/USD and USD/CAD would be a higher negative at minus 80% and 90%.

USD/CAD Vs GBP/JPY

What explains the low correlation in GBP/USD Vs USD/CAD is USD/CAD Vs GBP/JPY underperformance at minus 15%. if this relationship turns positive then USD/CAD and GBP/JPY will trade and track together. Current price at USD/CAD 1.3576 and GBP/JPY at 134.59 arent far away to distances from each other. This concept viewed from 1.3576 V 1.3459. A breakout s warranted from USD/CAD and GBP/JPY due to low correlations. The correlation should contain a much higher negative.

GBP/USD Vs GBP/JPY.

GBP/USD Vs GBP/JPY correlate at 94% and is correct. GBP/USD and GBP/CHF correlate to 72% and is low. Should be in higher +80 and +90's. GBP/CHF has underperformed in recent weeks and its now understood why. A positive correlation however serves as a backstop to GBP/USD as GBP/USD proper position is to trade between bottom GBP/CHF and upper pair, GBP/JPY.

EUR/USD Vs EUR/JPY

EUR/USD Vs EUR/JPY correlate to 97% and is perfect and this means longs and shorts run together perfectly.

USD/CAD Vs CAD/JPY

USD/CAD Vs CAD/JPY correlate to 52% and is far to low as the relationship serves much better to price movements against a higher negative.

Author

Brian Twomey

Brian's Investment

Brian Twomey is an independent trader and a prolific writer on trading, having authored over sixty articles in Technical Analysis of Stocks & Commodities and Investopedia.

EUR/USD off highs, back to around 1.1900

EUR/USD keeps its strong bid bias in place despite recedeing to the 1.1900 zone following earlier peaks north of 1.1900 the figure on Monday. The US Dollar remains under pressure, as traders stay on the sidelines ahead of Wednesday’s key January jobs report, leaving the pair room to extend its upward trend for now.

GBP/USD hits three-day peaks, targets 1.3700

GBP/USD is clocking decent gains at the start of the week, advancing to three-day highs near 1.3670 and building on Friday’s solid performance. The better tone in the British Pound comes on the back of the intense sekk-off in the Greenback and despite re-emerging signs of a fresh government crisis in the UK.

Gold picks up pace, retargets $5,100

Gold gathers fresh steam, challenging daily highs en route to the $5,100 mark per troy ounce in the latter part of Monday’s session. The precious metal finds support from fresh signs of continued buying by the PBoC, while expectations that the Fed could lean more dovish also collaborate with the uptick.

Crypto Today: Bitcoin steadies around $70,000, Ethereum and XRP remain under pressure

Bitcoin hovers around $70,000, up near 15% from last week's low of $60,000 despite low retail demand. Ethereum delicately holds $2,000 support as weak technicals weigh amid declining futures Open Interest. XRP seeks support above $1.40 after facing rejection at $1.54 during the previous week's sharp rebound.

Japanese PM Takaichi nabs unprecedented victory – US data eyed this week

I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.

Ripple exposed to volatility amid low retail interest, modest fund inflows

Ripple (XRP) is extending its intraday decline to around $1.40 at the time of writing on Monday amid growing pressure from the retail market and risk-off sentiment that continues to keep investors on the sidelines.