EURUSD and USDCHF Correlation | Forex Factory

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EURUSD and USDCHF Correlation

  • #1
  • First Post: May 7, 2008 1:46pm May 7, 2008 1:46pm
I was hoping someone could explain why there appears to be such a high correlation between the EURUSD and USDCHF? Also, has anyone tried exploiting this in terms of a trading strategy?
Thanks.
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  • #2
  • May 7, 2008 2:37pm May 7, 2008 2:37pm
  •  MPP
  • Joined Jun 2007 | Status: Be yourself, everyone else is taken | 2,734 Posts
read this, it's shows some details on correlations, look for Ash, he gave me the site and is spot on on Fundi stuff like this

http://fxlabs.oanda.com/cgi/fxlabs.pl?id=4
  • #3
  • May 7, 2008 3:00pm May 7, 2008 3:00pm
Thanks for theat link MPP, it is certainly useful. Looking at it, there really is a strong correlation between the two, much more than other pairs, and it interests me why this is...?

From that link, it appears that other interesting correlations are: USDJPY and USDCHF; EURGBP and USDCHF. All three contain CHF...
  • #4
  • May 7, 2008 3:27pm May 7, 2008 3:27pm
Quoting Impetus
Thanks for theat link MPP, it is certainly useful. Looking at it, there really is a strong correlation between the two, much more than other pairs, and it interests me why this is...?
Well, Switzerland is surrounded by eurozone members.
It's kind of like asking why usdcad and eurcad are correlated..
  • #5
  • May 7, 2008 4:18pm May 7, 2008 4:18pm
Quoting Impetus
I was hoping someone could explain why there appears to be such a high correlation between the EURUSD and USDCHF? Also, has anyone tried exploiting this in terms of a trading strategy?
Thanks.
Man....

Nobody seems to be giving you the correct answer. The pairs are correlated because they both consist of US Dollars. If USA does well one week, then EUR/USD goes down and USD/CHF goes up. Not because there is a causation between the two pairs, but because USA did well and thus results in correlation of the two pairs.

Best of luck,

Kevin
  • #6
  • May 7, 2008 4:48pm May 7, 2008 4:48pm
  •  MPP
  • Joined Jun 2007 | Status: Be yourself, everyone else is taken | 2,734 Posts
Quoting kharvell
Man....

Nobody seems to be giving you the correct answer. The pairs are correlated because they both consist of US Dollars. If USA does well one week, then EUR/USD goes down and USD/CHF goes up. Not because there is a causation between the two pairs, but because USA did well and thus results in correlation of the two pairs.

Best of luck,

Kevin
so what your saying is that the world see EUR and CHF as equal, thus when the USD moves it has an equal yet oposite affect on them.
  • #7
  • May 7, 2008 6:02pm May 7, 2008 6:02pm
Quoting MPP
so what your saying is that the world see EUR and CHF as equal, thus when the USD moves it has an equal yet oposite affect on them.
No... USD is pinned against different currencies. So that is why there are discrepancies. Say for instance I have $10 to sell, but news just came out that interest is going to be lower. Europeans want it, but Swiss don't. This is an example, but it could be ANYTHING. In that moment EUR/USD and USD/CHF did not correlate. These moments happen a lot.

Most of the correlations happen during important news periods... i.e. interest rates, employment, productivity, etc. These are the real market movers. Strong U.S. employment data would make USD stronger against all USD pairs more than likely. The difference is just who is trading what currencies.

Do not make the mistake of relying on this correlation because the traders who trade EUR/USD and USD/CHF are different, though both interested in USD.
  • #8
  • May 7, 2008 6:58pm May 7, 2008 6:58pm
Wrong, wrong, wrong.

It has to do with the amount gold that SNB holds (a lot!). Gold is a "safe haven" that people move their money into when the dollar is not doing well. Hence the almost perfect long term negative correlation.
  • #9
  • May 7, 2008 9:51pm May 7, 2008 9:51pm
The USD is almost always the dominating factor in it's pairs. Altho the CHF economy is fairing a little worse than the bulk of the eurozone it seems.
  • #10
  • Last Post: May 7, 2008 10:00pm May 7, 2008 10:00pm
The only correct answer: Who cares. It just "does".

As for a strategy...I have seen a few, but I would say never go long on one, while shorting the other. The odds of doubling your losses is good. (Yes I know you can win too, but be safe.....you will be alright.)

Clockwork
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