In currency market we found two types of correlation like 1.Positive Correlation and 2.Negative Correlation
1.Positive Correlation:Which pair normally tend to move with same direction that two pairs are positively correlated.As per example most of the time we see EURUSD and EUR JPY moved with same direction.If eurusd go to up eurjpy also same. But when we found eurusd go to down and eurjpy gone to up that means it is the effect of usd or jpy that is for few moments or day. For its positive correlation they again meet closely. In that case we can open one buy position for eurusd and one sell position for eurjpy. Today or tomorrow must make profit from these two position. Above picture we seeing that EURUSD gone to up and EURNZD gone to down. But normally they are positively correlated. Now they are very far from each other. It is the fantastic opportunity to take short entry from EURUSD and long entry from EURNZD. Because of their positive correlationship must they will come to close contact each other again. Positively correlated pair Between the two pairs EUR/USD and GBP/USD is positively correlated because if the demand for U.S. Dollars increases, the level of both currency pairs will usually going down. In the other hand if the demand for U.S. Dollars falls, then the levels of both currency pairs will tend to increase. Similarly The following currency pairs moved on the same way
- EUR/USD and GBP/USD
- EUR/USD and NZD/USD
- USD/CHF and USD/JPY
- AUD/USD and GBP/USD
- AUD/USD and EUR/USD
- USDCAD and USDJPY and like these way.
2.Negative Correlation:When two pair moved with opposite direction that means one going to upside and another gone to downside. This type of relationship we called negative correlationship. USDCHF and EURUSD are negatively correlated because most of the time when EURUSD going to up USDCHF run to down.For this reason these two pairs are negatively correlated. Some negaively correlated pair is
- EUR/USD and USD/CHF
- GBP/USD and USD/JPY
- GBP/USD and USD/CHF
- AUD/USD and USD/CAD
- AUD/USD and USD/JPY
- EURAUD and AUDJPY and like these type .