Does anyone trade using the positive or negative correlations between sets of currencies, i.e. the negative correlation between EUR/USD and USD/CHF exchange rates(one goes up the other nearly always goes down) after some monthly news releases.Thanks
Generally the market is very efficient in pricing those shocks. What you could do is analyze the spread between the two currencies. You could set up a computer run to find you weighting for the two pairs to find a stationary spread between the two. After you have sufficient confidence in the spread (this is not simple), you could basically trade the EURCHF cross based on the weights you selected whenever the spread gets out of line. This saves you spread costs and margin.
Do some searches on cointegration etc. Tons of academic papers out there to find stationary spreads. Not guaranteeing anything though...having a successful way of identifying and exploiting stationary spreads would be a money machine but its a tough process (with a lot of competitors).
