This isn't as simple a question as it first appears. I am struggling to understand why individual currencies behave almost identically on all their pair crosses at exactly the same time.
For example, when the EUR is weakening, it will drop simultaneously against the USD, CHF, JPY, GBP etc. On the face of it this seems perfectly obvious, but with a little more thought, I just can't understand the reason or the mechanics behind it.
As we all know, the selling of one currency is only done by the buying of another. It's a true exchange of one for the other, and exchanging currencies electronically is no different to doing it physically at your local bank or Bureau de change. If I determine that the EUR is getting less valuable, I would want to sell it and exchange it for something of more value (preferably of the greatest value). If I was to do this in my local bank, I would not walk in with my Euro's and ask to exchange them for GBP, and USD, and CHF, and JPY etc, not least because any one of those other currencies may be of even less value than my Euro's.
So why does the EUR strengthen or weaken simultaneously against all the other currencies? This is particularly evident when watching very short term time frames. If there is a sudden 20-30 pip move involving the EUR over a 2 minute period, the same move will show up on every pair which includes the EUR. Why? How does that happen?
Is someone actually buying or selling the same currency in exchange for any and every other currency they can get their hands on? If so what would be the logic for this action? Or is it a case of the main liquidity providers simultaneously removing their BID's or OFFER's from the market for some reason? (contrary to popular belief, prices can move on your chart without any buying or selling taking place).
I can understand the correlation over the longer term as governed by economic sentiment, but I can't understand it in the supposed "noise" at the shorter term. The apparently "random" fluctuations and spikes will happen almost identically on every single pair involving the same currency, and for the life of me, I cant figure out why this would happen. Why would "noise" happen at the same time on every pair? That 10 second spike up and then immediately back down again happens on every EUR pair - that isn't random; it has to be coordinated in some form or another.
Any help from someone with more in-depth market knowledge than me would be greatly appreciated.
For example, when the EUR is weakening, it will drop simultaneously against the USD, CHF, JPY, GBP etc. On the face of it this seems perfectly obvious, but with a little more thought, I just can't understand the reason or the mechanics behind it.
As we all know, the selling of one currency is only done by the buying of another. It's a true exchange of one for the other, and exchanging currencies electronically is no different to doing it physically at your local bank or Bureau de change. If I determine that the EUR is getting less valuable, I would want to sell it and exchange it for something of more value (preferably of the greatest value). If I was to do this in my local bank, I would not walk in with my Euro's and ask to exchange them for GBP, and USD, and CHF, and JPY etc, not least because any one of those other currencies may be of even less value than my Euro's.
So why does the EUR strengthen or weaken simultaneously against all the other currencies? This is particularly evident when watching very short term time frames. If there is a sudden 20-30 pip move involving the EUR over a 2 minute period, the same move will show up on every pair which includes the EUR. Why? How does that happen?
Is someone actually buying or selling the same currency in exchange for any and every other currency they can get their hands on? If so what would be the logic for this action? Or is it a case of the main liquidity providers simultaneously removing their BID's or OFFER's from the market for some reason? (contrary to popular belief, prices can move on your chart without any buying or selling taking place).
I can understand the correlation over the longer term as governed by economic sentiment, but I can't understand it in the supposed "noise" at the shorter term. The apparently "random" fluctuations and spikes will happen almost identically on every single pair involving the same currency, and for the life of me, I cant figure out why this would happen. Why would "noise" happen at the same time on every pair? That 10 second spike up and then immediately back down again happens on every EUR pair - that isn't random; it has to be coordinated in some form or another.
Any help from someone with more in-depth market knowledge than me would be greatly appreciated.