Currency correlation

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    Currency correlationWhat is currency correlation in forex trading?

    In the forex marketcurrency correlation is one of the most important fundamental concepts.

    Correlation means that two sets of data influence each other to a certain degree, i.e. they are dependent and not statistically independent. For currency correlation, the data sets are the price action of two different currency pairs.

    The correlation is based mostly on economic dependencies and monetary policy. For example, the economies of Switzerland, the European Union and the United Kingdom are strongly interwoven. This means that when one of their currencies (Swiss franceuro and British pound) wins or loses against the dollar, it is likely that the other two currencies develop similarly.

    Please note that because of the order of the base currency and quote currency in the currency pairs, USD/CHF is negatively correlated with EUR/USD, even though the EUR and the CHF are positively correlated with each other.

    Learn more about the correlation of currencies: