Learn the techniques on how to use market correlation. This will give you a hidden edge over your fellow traders in the market. This is critical for those who are looking for a strong understanding of market direction.

 

Understanding Market Correlation

When the price of two or more different pairs moves together we are talking about market correlation. Note that in forex the price of different pairs can move up on both, but that it can also be reversed. This means that when one moves up, the other consistently moves down. We talk about market correlation in both cases.

Correlations are dynamic, they will always change over time. They can actually vary very much over different time periods. And even the correlation on for instance the 4h chart may vary a lot from the correlation on the 15min or weekly chart.

 

Market Correlation doesn't Matter If Your Technical Analysis Is Not Up To Par

Market Correlation doesn't move the forex markets. A confluence of other factors move the market - most notably central bank policy. So if you see correlation among a few pairs or a whole currency group, you have a great tool to determine the direction. With this in mind you can use your technical analysis skills to assess which pair is the best to trade in that direction. However, if you lack the technical analysis skills, then knowing market direction is not very useful at all. For instance, you can be aware of the direction, but if you don't read the market well enough to determine the timing and stops of your trade, there's a good chance you will get stopped out. And getting stopped out and later seeing the trade move in the direction you predicted is a major painful thing to see for any trader.

So as always with trading tools, make sure your read of the story is good and before that; get your basics cemented. 

Watch the video at the top for the full lesson so you can continue to enhance your skills and be better everyday.

 


Any opinions, news, research, analyses, prices, or other information contained on this website is provided as general market commentary, and does not constitute investment advice. Urbanforex will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.<7p>

Editors’ Picks

EUR/USD deflates to three-day lows around 1.1130

EUR/USD deflates to three-day lows around 1.1130

The euro remains under heavy pressure on Friday, with EUR/USD retreating toward the 1.1130 level to hit new three-day troughs. Despite a weaker reading in the U-Mich index in May, the US Dollar found support as inflation expectations ticked higher.

GBP/USD slips back to 1.3250 on USD-buying

GBP/USD slips back to 1.3250 on USD-buying

GBP/USD recedes to the mid-1.3200s on Friday session, as the Greenback regains ground against the broadeer risk-linked universe. Supporting the upside in the US Dollar comes a rise in US consumer inflation expectations, according to the latest data from the U-Mich survey.

USD/JPY Price Forecast: Finds temporary support near 145.00

USD/JPY Price Forecast: Finds temporary support near 145.00

USD/JPY gains temporary ground near 145.00 as the US Dollar recoups initial gains. The Japanese economy contracted by 0.2% in the first quarter of the year. Investors await the flash US Michigan survey data for May.


Editors’ Picks

EUR/USD deflates to three-day lows around 1.1130

EUR/USD deflates to three-day lows around 1.1130

The euro remains under heavy pressure on Friday, with EUR/USD retreating toward the 1.1130 level to hit new three-day troughs. Despite a weaker reading in the U-Mich index in May, the US Dollar found support as inflation expectations ticked higher.

GBP/USD slips back to 1.3250 on USD-buying

GBP/USD slips back to 1.3250 on USD-buying

GBP/USD recedes to the mid-1.3200s on Friday session, as the Greenback regains ground against the broadeer risk-linked universe. Supporting the upside in the US Dollar comes a rise in US consumer inflation expectations, according to the latest data from the U-Mich survey.

Gold looks depressed below $3,200

Gold looks depressed below $3,200

Gold reversed course on Friday, falling sharply below the $3,200 mark after Thursday’s strong rally. The retreat came as a resurgent US Dollar and easing geopolitical tensions weighed on demand for the safe-haven metal. Furthermore, XAU/USD remained under pressure and is on track to log its biggest weekly loss of the year.

Is Ethereum's comeback real?

Is Ethereum's comeback real?

Ethereum price hovers above $2,500 on Friday after soaring nearly 100% since early April's bottom. The ETH Pectra upgrade has boosted over 11,000 EIP-7702 authorizations in a week, indicating healthy uptake by wallets and dApps.

Trump’s Middle East dealmaking blitz: What does it mean for investors?

Trump’s Middle East dealmaking blitz: What does it mean for investors?

President Donald Trump’s May 2025 Middle East visit has unleashed a flurry of mega-deals, aimed at deepening U.S. trade ties, correcting trade imbalances, and reinforcing America’s leadership in defense and technology exports.

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