But in the EUR/JPY V JPY/EUR relationship, its the EUR side that remains top heavy. Most top heavy, neutral zone and market uncertainty is explained by EUR/USD Correlations to EUR/JPY at minus 90% and + 90 to USD/JPY. This means EUR/USD lost its ownership to EUR/JPY and EUR/JPY belongs to USD/JPY. Correlation informs overall, markets still trade and reside in risk off mode which is a USD positive environment.
The chart to the left is a comparative study of major foreign currency pairs, some of them inverted to their reciprocals (for example CAD/USD instead of USD/CAD), allowing a quick glance of recent performance of some of the major currencies against the US Dollar.
Scroll the chart to fix the zero percent point to the moment you wish (the start of the week, the start of the day or the current market session).
Feel free to build you own comparative charts using the interactive charting tool.
Latest Correlation Analysis and News
Knowing how closely correlated the currency pairs are in your portfolio is a great way to measure your exposure and risk. You might think that you're diversifying your portfolio by investing in different pairs, but many of them have a tendency to move in the same or opposite direction to one another. The correlations between pairs can be strong or weak and last for weeks, months, or even years. [...] Any correlation calculation will be in decimal form; the closer the number is to 1, the stronger the connection between the two currencies.
[...] Just as on the positive side, the closer the number is to -1, the more connected the two currencies movements are, this time in the opposite direction.
[...] the most important aspect to remember when analysing currency correlations is that they can also easily change over time.
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Correlations and Inter-Market Analysis
...this opposite relationship between the DOW and USD did not always exist. In the years past under high interest rates, stock prices and the USD did enjoy a positive correlation as foreign investment capital that finds its way into US businesses, US stocks, and ultimately the USD.
Market participants can use the combination of signals in the bond-, commodities- and stock markets to recognise which part of the economic cycle the market is in and which asset categories should be over- or underweighted. Above all, Intermarket analysis helps to achieve a better overall understanding of the financial markets in general.
Besides an introduction to “intermarkets”, this article offers concrete applications for trading and ways of optimising existing trading strategies. Based on the “crossover“ strategy, the possibilities offered by intermarket analysis as a logical trading filter will be presented.