I discovered something interesting...
1. Look at the daily 10 year charts of AUD/USD and EUR/AUD
Compare them... you won't really see much of a correlation (especially at the beginning)
2. Then look at the daily 6 month (last 6 months) charts of AUD/USD and EUR/AUD
ALMOST EXACTLY THE SAME!!!! (i.e. mirror images of each other) Even small weekly movements are correlated!
So, what is going on? Both USD and EUR have similar interest rates, so i'm guessing that carry trades are involved?
Anybody who is more experienced disagree?
Thank you!
rudenstein
1. Look at the daily 10 year charts of AUD/USD and EUR/AUD
Compare them... you won't really see much of a correlation (especially at the beginning)
2. Then look at the daily 6 month (last 6 months) charts of AUD/USD and EUR/AUD
ALMOST EXACTLY THE SAME!!!! (i.e. mirror images of each other) Even small weekly movements are correlated!
So, what is going on? Both USD and EUR have similar interest rates, so i'm guessing that carry trades are involved?
Anybody who is more experienced disagree?
Thank you!
rudenstein