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Forex Trading Correlation: Trading Correlated Pairs Strategy for Profit
welcome to this video expect our which is on 20 seconds of January last eight hours asking anyone who is watching the forecast that I did are there any topics you uncovered in video and yeah one that i was asked quite a bit about is some the correlation of Forex pairs any relation to correlations how they correlate with risk on Andres Costa why they do so next it's quite a topical subject at the moment some of people are worried about a move fear from risk on to risk alfeo possible big correction in equities which currencies perform the best switch perform the worst and why so then look at that in a moment also I frequently get asked yeah do I think the US dollar is going to collapse you see more doom and gloom about that online the answer is no and the reason is because of the way it acts in terms of its reserve status in the global financial system which we will also look at so gonna do now is look at some currencies their personalities and having likely to fare in both a risk own environment and of course if we move to risk us and just enlist their peers down we'll just go through them right it's a good forex correlation in terms of positive and negative correlation with risk now what I'm going to do is just go through currencies with positive correlation with risk of those with risk on how trade the two groups and also within the two groups next in terms of positive correlation with risk of theirs for currencies that as a rule of thumb will gain on all others if yet we see nervous in the global financial markets a big sell-off in sa equities well as thought with some US dollar festival it's the world's reserve currency a lot of people saying how you know it could collapse in the near future it's not us going to be a safe haven ymore it's always going to be a safe haven because it's world's reserve currency status now comes back in the moment the first white chick game in terms of moves from risk well obviously us is for the biggest most liquid bond market in the world money flows from equities in the bonds okay but the other reason why it gains is because being the world's reserve currency a lot of banks see Kristin on the US will grant loans against a US dollar base into other countries and can't see so basically the money will be taken from us Donna's and then given in to the other currency as alone okay those loans start to dry up when you get a move our risk off furthermore loans that are in another currency another country it very often called back by the bank that has granted them so that currency has to be converted back to US dollars why you have to buy US dollars that helps the dollar rise and there are hundreds of trillions of dollars in loans like that around the world so that is why the US or is unlikely to collapse and who's going to be a safe haven okay now moving to the st. Lazare graded than one before US dollar i put in second place at the number one safe haven is the JPY lot of people are puzzled while I JPY would be a safe haven well it hasn't got um yeah great economy it's got negative interest rates but it's got two things going for it which make it a safe haven in the world's number one first is it's got the second largest bond market in the world so money flows into bonds that helps it but the major factor is Japanese basically huge favors they have massive holdings of risk assets around the world when you get a move from risks they sell them up and bring them back to Japan okay there are two other safe havens minor ones but they're always worth keep an eye on and my view bum swiss franc ah Switzerland has always been a safe place to put your money in times of turmoil so it's still a safe haven debate in recent years of singapore dollar has become was Singapore's becomes Switzerland of the East politically stable and a safe place but money time to turn on that they're miners safe havens do I always think they were keep night come back that moment now transparencies Argo appositive correlation well in with risk on a they're probably going to rise as a rule of thumb over the risk of currencies yeah if you've got optimism about the global economy and equity prices are firm I put your own GBP but that isn't such a strong correlation as commodity currencies I the aud cat and ends that they come up appearances are much more sensitive to risk as a general rule why global economy is doing well commodity prices tend to be firm also if you've got like strong stock markets is massive speculation in commodities so no spectators are just buying commodities because it's optimism about global economy um if the global economy slows obviously come on peaceful if you get a sell-off inequities that will always be accompanied by sell-off income of these speculators run recover so aud cadnams at the of the majors the ones the watch are against the risk of currencies are also listed out the emerging currencies then more people don't bother looking at emerging currencies because obviously it slightly wider sprites in them but that doesn't matter if you're a long-term trend for you can very often get great opportunities in these currencies they are know as a group the most vulnerable in terms of move to risk off and this is that few of them just going to go through them turkish lira pleasure that's already moving lower a lot of political problems in Turkey it will sell off more if we move to risk of mixed complacent obviously is full and ricci on the Trump's you spared the mix ago still as further to fall if we move to risk of cnh offshore Chinese LOM this one is a good down trend but it missed Antron will really accelerate if we have a move to risk off yet China very vulnerable to capital outflows so that looks a really good long-term trend to us russian ruble our world's biggest commodity producing nation okay but the rubles been fairly firm ah that's because interest rates are holding it up and that that doesn't apply when you get to risk off in my view I think the Russian ruble very vulnerable to a sell-off are similar bargain price south african rand it's been firm but a move big move from risk seniors are a sell-off on emerging market currencies in europe to keep your i hope this sloppy hungarian flan again vulnerable if we get moved from risk so what you can do is you can just treat the risk of currency against the risk on currency co Arctic your favorite obvious japanese yen we see the US dollar as well in terms of the swiss franc and singapore dollar i think they have their worth trading against the commodity currencies in particular why because very often you get enough speculative interest in these two miners safe havens which means they're not Spidey is the JP line USD so always think yes this drink singapore dollar worth trading and i think yeah on the aud caregiving said being there well worth alert so yeah you can just trade yet risk-off currencies to risk on or you can trade within groups so for example in terms of safe havens you take the strongest one JPY buy it on the other three and the USD would be a bye on the switching the Singapore for example we do the same in the group with a positive correlation with risk on yeah for example your m GBP in my view by them over the commodity currency so we haven't really seen a big move away from risks but i think that is coming at the thing to keep the currency in yet personalities in mind and have a line up in groups you can take advantage the correlations yo in terms of if we get a move our from risk on to risk off first my little summary of the forest correlation in terms of risk and safe haven currencies welcome back after that short overview there on how I see forex correlations in relation to being in a risk on environment and of course if we move to risk of environment next in terms of way the correlations yeah giving them obviously any pair can be affected by other events which change that background okay but in general terms yet if we did have a big move from risk on to risk off I see the Trump sees doggin strengthening and weakening as we looked at in the summer it now in terms of some US dollar collapsing due to the way X as a reserve currency in the world I just see go so unlikely and yeah I've been hearing about dollar is going to collapse for over 30 years it hasn't yet the amount of loans that are granted against a US dollar a base me yep in a move from risk yeah the US dollar is going to write in my view I just see the dollar as remaining a safe haven although many people might disagree with me now in terms of just doing those correlations they can help you go find some great risk reward entries on your chance in my view so yeah I'm interrelations that can or basically change but those relations I see the in place at the moment I do think there is the potential for a move to risk us and to say those correlations can give us some yet decent risk scored opportunities now in relation to any other subjects of topics people one yeah covered in videos please feel free to write to me and i'll be happy to do the video on any forex related subject so is the video of the first day thank you very much for watching you
