Predicting the EUR/USD by using Currency Correlations
I saw many folks speaking about correlations and how powerful they are, so because the EUR/USD has become easily the most popular pair traded, the Dollar index is probably the most correlated with the EUR/USD.
The http://en.wikipedia.org/wiki/U.S._Dollar_Index, is almost exactly the opposite function of the EUR/USD movement, so what I did is I produced an indior which shows you that the Dollar index, but because the USDX is that the reverse of the EUR/USD, I just inverted it, so now it shows that the EUR/USD very well.
My question to correlation traders is: How can you make the most of this? Can you call the EUR/USD to have atleast a edge by making use of the Dollar Index?
Can Be divergence trading possible here? Other observations If anyone among you're using currency correlations, and are expert in them, I would like you to discuss how do you use the USDX?
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This is my own made Dollar Index indior:
As you can see its almost exactly the opposite of the EUR/USD, so I inverted it, so the reverse looks similar to this:
it's following well the price action:
So what do you think guys?
Myself for sure not. However, an Australian airline buying three aircraft will proceed E/A up. A/U and e/U is only going to reflect this. This market of 230M AUD to 150M? Is what will make the worth of A/U and this E/U change. At least for a brief time. It makes no difference whether their bank will convert first to USD for liquidity reason.
That's accurate. The value of the E/A changed because there was an increased demand from the euro and a reduction in demand for the aud. Has nothing to do for a trading tool with all the E/A, it's just that the E/A changed as a result of the transaction.
wow. Great to see that this brought up here. I've made the change from FX over to futures and the DX is my trade using precisely this methodology and it functions.
When you're able to overlay the two on a chart, it is crazy. (ThinkOrSwim here. .)
So, I have two major chart setups:
1) DX using a EUR overlay. 2m, 5m, 15m, 1h
- other chart packs: daily/weekly
- person 30m
- person 4h
two ) EUR (57.6), JPY(13.6), GBP(11.9), CAD(9.1) with DX overlay. This setup is order of size for contributors into the by percent. I'd have this bunch set with the CHF along with USD/SEK, but I dropped em - did not appear to help that far with those. These are 30m charts.
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