...Apologies for political incorrectness below - I have tried to enliven what is a pretty “dry” post....
Meet the family
Sterling (Red)
Volatile little varmit, mainly “hates” (ie negative correlation) the Yen and USD$
Not absolute friends (ie positive Correlation) with anything else (in my humble opinion) perhaps is more friendly and runs with the European Currencies than anything else – but much more Volatile so don’t get bitten !
Non Forex-wise any relationships it has are probably due to its negative
correlation to the USD$ and the Yen – so refer below to those comments
Euro (Blue)
Lower volatility than most again I would say, primarily “hates” (ie negative correlation) the Yen and USD$. Its best chum (ie positive Correlation) is the Swissie and they go most places together in my opinion.
Non Forex-wise any relationships it has probably relate more to its Negative correlation to the USD$ and the Yen – so refer below to those
SwissFranc(Grey)
All said above in the Euro comments …Swissie (in my opinion) demonstrates
lowest volatility levels of all the Majors most of the time…useful for trading against higher volatility currencies
AUS$ (Gold)
Gday mate…….It cant stand the USD$ and the Yen, and should party a lot with its neighbours (NZ$) but seemingly not enough as you would trade reliably on … loves to party hard with high interest rates on offer compared to the other Majors.
Non Forex-wise …….“loves” Gold (positive correlations) but enough to trade reliably on (?)
NZ$(Lightblue)
Same relationships as its neighbour above…..is also fond of high interest rates…….
YEN (Yellow)
Volatile and mainly “hates” all currencies (ie negative correlations) except the
USD$, which generally moves in the same direction (but US$ is generally less volatile). People sell it in perceived times of greater risk/opportunity as it has the lowest interest rates out there....then they can buy high Yielders (AUS$ and NZ$)
Non Forex-wise It “hates” (negative correlation) most Stock indices and Commodities. Traders sell Yen (the carry trade) to buy these (and Vice versa)….watch it against the US Stock Indices for closest (negative) correlations
CAD$ (Brown)
Difficult to pin this one down - except moves generally negative to US$ and Yen
Non Forex-wise …….“loves” Crudeoil (positive correlation) but enough to trade reliably on (?)
USD$ (Green)
The “Daddy” whether the rest of the unruly forex family like it or not !.
“Hates” all currencies (ie negative correlations) except the Yen , which generally moves in the same direction (but the US$ is generally less volatile). People sell it in perceived times of greater risk/opportunity (its the major holding reserve currency for most countries) Counter-wise traders will buy it as a safe haven when they are dumping everything else and risk appetites are falling……commonly dumping the high Yielders (AUS$ and NZ$)
Non Forex-wise It “hates” (negative correlation) most Stock indices and Commodities. Watch it against Gold especially for some great (negative)
correlation Plays...
