Interesting Question Regarding Currency Exchange (forex)?
I have found that when the US indexes (NASDAQ, DOW, S&P 500) gain (or lose) so does the Euro as part of the EUR/USD pair. There is a positive correlation. Why does this occur? I had the thought that as risk becomes less popular and people sell their stocks they put the money into treasury bonds, possibly driving up the USD. Does anyone know for certain what drives this phenomenon? Best answer points available for good concise information. Thank you.
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Tags: Currency, Exchange, Forex, Interesting, Question, regarding
January 4th, 2010 at 6:36 pm
Forex Movement is correlated by two way trading nowadays.
a.It is Closely Correlated with the Equity Markets.In this case, When Stock Market does +ve , Higher Yielding currencies like Euro, AUD, NZD,rand, Brazilain real, INR,….appreciates against Low yielding Currencies like Yen, Swiss Franc, USD and Vice versa.
b.It is purely Technical Play.In this case, Tracking equity market and playing currency trading as per that will not produce successful Results.Try using Stochastics, RSI .
Apart from those things, You also need to aware of:
1.Does Central Bank of particular currency which you are trading is Intervening?
2.Any Fundamntal News that the currency you are trading is carrying ?
3.Does the Cross rates are Floating or Fixed?
4.Beware of rollovers
Good Luck.
January 4th, 2010 at 6:41 pm
at this time many investors believe that a lower dollar would help the american economy by making exports less expensive. as a result whenever the dollar drops these investors buy stocks anticipating higher profits in the future.
January 4th, 2010 at 7:24 pm
When the dollars goes down the Euro and other currencies go up against the dollar.Plus commodities go up when the dollar goes down.Copper goes up and oil the Yen goes down and the Canadian dollar goes up.Copper up Australian dollar goes up also.
January 4th, 2010 at 8:02 pm
Well yes, when the US stock markets rise it tends to push the dollar down. That would push the Euro up against the dollar. So there is a positive correlation between the US stock market and the Euro.