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Mon, May 20, 2024

Correlation Analysis: CADCHF, USDCAD, USDCHF at key levels

Correlation analysis on CADCHF currency pair

Correlation Analysis: USDCAD + USDCHF = CADCHF

CADCHF is moving in a downtrend forming lower highs, lower lows in 1-hour timeframe chart. cadchf fall from lower high

Now, CADCHF starts to fall from a lower high of the downtrend line. In another side, USDCAD reached the Lower Low in 4-Hour timeframe Chart. USDCAD reach lower low in h4 tf USDCHF reached the Support Level in 1-hour timeframe chart. USDCHF reach support level in h1 chart Both USDCAD and USDCHF are correlated together in CADCHF currency pair. Technically CADCHF standing now at the lower high of Downtrend. Do you want to learn to make profits using chart patterns? Click here to see the complete guide on Chart Patterns. Forex signals are a great way to get profitable trades, even if you don’t know how to analyze chart patterns yet. Expert analysts will provide you with appropriate risk management strategies, so you don’t make the top forex mistakes like every trader. Don’t trade all the time. Trade only at the best trade set up with Forex GDP. We are here to help you for taking the trades only at best trade setup. Start to receive the forex signals now: forexgdp.com/forex-signals/

What is Currency Correlation?

  • Currency correlation in forex trading measures the degree to which two currency pairs move relative to each other. It’s expressed as a correlation coefficient between -1 and +1.
  • +1: Perfect positive correlation (pairs move in tandem).
  • 0: No correlation (pairs move with no relationship).
  • -1: Perfect negative correlation (pairs move in opposite directions).

USD Correlations

The US Dollar is the world’s reserve currency and is involved in approximately 88% of all forex trades. This means it has significant correlations with other major currencies:

  • EUR/USD (Euro): Typically has a strong negative correlation. When the USD strengthens, the EUR often weakens, and vice versa.
  • GBP/USD (British Pound): Often has a strong positive correlation in the short-term, though this can weaken over longer periods.
  • USD/JPY (Japanese Yen): Traditionally has a strong positive correlation, but that may change depending on global risk sentiment (when risk is high, JPY is considered a safe haven and may strengthen against the USD).
  • USD/CHF (Swiss Franc): Strong negative correlation, with the CHF also acting as a safe-haven currency in times of economic uncertainty.
  • AUD/USD (Australian Dollar) and NZD/USD (New Zealand Dollar): Positive correlation with the USD, but influenced significantly by commodity prices (Australia and New Zealand are big commodity exporters).

Why Correlations Matter in Forex Trading

  1. Diversification: Understanding correlations helps you avoid buying or selling currency pairs that move in the same direction. True diversification means choosing pairs with weaker or negative correlations.
  2. Risk Management: Knowing correlations can help offset risk. For example, if you have a long position on EUR/USD, a short position on USD/CHF could act as a partial hedge since they typically have a negative correlation.
  3. Trade Confirmation: If you are considering a EUR/USD trade, strong movement in the same direction on GBP/USD (positive correlation) can add confluence to your trade idea.

How to Find Currency Correlations

  • Correlation Tools: Many online forex brokers and charting platforms offer built-in correlation calculators or matrices.
  • Websites: Several websites specialize in calculating currency correlations, such as:
    • Myfxbook Correlation Calculator
    • OANDA Correlation Table

Important Notes

  • Correlations are dynamic: Market conditions change, and correlations fluctuate over time. It’s essential to regularly check current correlations rather than relying solely on historical data.
  • Other influences: Correlations are a helpful tool, but they represent only one aspect of market analysis. Fundamental factors, market news, and economic data also play a crucial role

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