Currency Pair Correlations and EUR/USD Averages

As highlighted yesterday to EUR/NZD correlations to EUR/USD at +42% and +10% to NZD/USD, GBP/NZD begins the year in a far worse situation than EUR/NZD..


GBP/NZD correlations to GBP/USD runs minus 25% and minus 62% to NZD/USD. To re correlate correctly to either GBP/USD or NZD/USD, GBP/NZD must move significantly. Normally a break of a significant average would force GBP/NZD to re marry correctly to correlations.


GBP/NZD’s place in currency markets is the number 1 mover to wide, wide ranges followed by GBP/JPY while number 3 is not to be found. GBP/AUD, GBP/CHF and EUR/NZD were next as big movers but all were reduced to nothing in the new modern day currency markets.


GBP/AUD remains a problem to the GBP universe at – 17% correlations to GBP/USD and negative 32% to NZD/USD. GBPCAD is holding at +38% to GBP/USD.
Positive, negative and problem correlations are found within moving averages. Here’s GBP/AUD averages from 5 to 253 day


5 day = 1.8577, 10 day = 1.8573, 20 day = 1.8560, 50 day = 1.8554, 100 day = 1.8536, 200 day =1.8610 and 1.8511 at the 253 day average. GBP/AUD is not a trade able currency.


The AUD/USD universe is correct except for AUD/NZD running at -23% correlations to AUD/USD and +47 to AUD/CAD. AUD/NZD is the opposite pair to AUD/CAD.
NZD/USD also runs correct at +90% to the NZD universe.


EUR/GBP is a further conundrum to the EUR cross pair line up as correlations run +86% to EUR/USD and +73% to GBP/USD. EUR/GBP was never worth a trade effort particularly in today’s currency markets.


USD/JPY vs USD/CAD is correct at +93% and -96% to EUR/USD but not correct to USD/CHF at +23%.
EUR?USD 2005, 2014, last week and today.
EUR/USD pre 2016 interest rate changes is highlighted below by averages pre and post 2016 and from the period September to December.


2005
5 day = 1.1851
10 day = 1.1911
20 = 1.1876
50 = 1.1797


100 = 1.1917
200 = 1.2058
253 = 1.2195
Averages spread 398 pips.


2016


5 day = 1.0460
10 day = 1.0439
20 = 1.0480
50 = 1.0591


100 = 1.0836
200 = 1.1002
253 = 1.1064
Average spread 625 pips.


Last week


5 day = 1.1299
10 day = 1.1303
20 day = 1.1296
50 day = 1.1338


100 day = 1.1489
200 day = 1.1672
253 day = 1.1763
Average spread 467.


Today


5 day = 1.1314
10 day = 1.1306
20 day = 1.1303
50 day = 1.1311


100 day = 1.1464
200 day = 1.1645..
253 day = 1.1748


Average spread 445 pips and a 22 pip drop from last week. The difference today to average spreads is pre 2016 employed a far different set of interest rates as noted by much greater daily and weekly movements from today to 400 pips. The 400 pips will eventually contract for 2022 for an additional slowdown to daily and weekly moves. Where containment is seen is the 5 to 20 and 50 day average spreads as prices enter 50 and 100 pip spreads.

Brian Twomey

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