Tonight I want to share something that all of you may or may not know about this. Ever wonder why some trader assume that when gbp/usd and eur/usd are moved in the same way? Is it because is same opposite pair usd? might be.. but the true answer is .. the currencies pair have their index between each other pair. This index is called “Currency Correlation” .

A web service that called www.mataf.net that offer price close daily are also offering the currency correlation table.

How to read the correlation?

The following tables represent the correlation between the various parities of the foreign exchange market (forex).
The correlation coefficient highlights the similarity of the movements between two parities.

* If the correlation is high (above 80) and positive then the currencies move in the same way.
* If the correlation is high (above 80) and negative then the currencies move in the opposite way.
* If the correlation is low (below 60) then the currencies don’t move in the same way.

So I hope you with me in the track now knew why we know some currencies are following other pairs. It is because the correlation index. So by now you can manage your trade if you go long with this let say Eur/usd pair.. please dont go short on gbp/usd if the correlation if above 80 unless you are scalper.

This is the 1H correlation that been served by mataf.net

This is the daily correlation index

p/s: correlation are NOT FIXED and changing by time to time.

Regards,

Aidil Azhar