How to Use Currency Correlations in Forex
The most important Forex Currency Correlation to know is the one between the following 4: EUR/USD, GPB/USD, USD/CHF, and the Dollar Index. These 4 provide clues to each other. So, if you’re trading the EUR/USD, GBP/USD, USD/CHF or the Dollar Index, then be sure to look at all 4 charts as an additional confluence to your trade. You may or may not find any additional confirmation, but you need to check regardless, because every clue helps.
Here is an example. Let’s hypothetically say you identified a Double Bottom Reversal Pattern on the EUR/USD. Based on your market analysis, you feel confident to place a Buy Order on the EUR/USD. As an additional confirmation you need to take a look at the other 3 charts. You may notice a Double Bottom Reversal Pattern forming on the GBP/USD. You may notice a Double Top Reversal Pattern forming on the USD/CHF. You may notice a Double Top Reversal Pattern forming on the Dollar Index. If you notice any of these Double Top or Double Bottom Reversal patterns, then you have some additional confirmation or confluence to place your Buy Order on the EUR/USD.