My Compass, my Cheat Sheet, my Side-KickTVC:DXY
OANDA:EURUSD
I keep this close to me.
I never lose sight of this.
Correlation
Always Close by my SideTVC:DXY
OANDA:EURUSD
I always have the Dollar Index close by my side
Correlation = "a mutual relationship or connection between two or more things."
Trade well
VIX to $64 We can easily see a spike up to ~ $64 on the VIX if these narratives continue to worsen in Ukraine. Correlations are approaching 1? VIX will soar.
BTC Correlations vs ES / NQ / GOLD / DXY / Global LiquidityBTC was strongly correlated to equities for long periods of time
Most noticeably, from the beginning of COVID until the LUNA collapse the correlation was almost constantly close to 1.
Recently, BTC seems to decouple from equities again and track GOLD more closely.
Overbought/Oversold BTC + fib levels This analysis is purely based on TA.
The bottom pane indicator represents peaks and troughs of the dollar's correlation with BTC, but the dollar is valued against bonds and gold. This is due to it showing the demand for cash/capital against safe heavens, therefore illustrating the beginning and ends of different economic cycles (states).
- Works by showing trend reversals or sudden increased strength of the trend at the purple middle line (correlation +above,-below) and it's peaks and troughs.
BTC and the DXYOvernight as the DXY strengthened massively, Bitcoin fell to retest the support level of 22,000. Hence, again highlighting the relationship between BTC and DXY.
Bitcoin has become a popular alternative investment option that has garnered the attention of traders worldwide.
Meanwhile, the US Dollar Index ( DXY ) remains a crucial benchmark for the strength of the US dollar against a basket of major currencies.
Although Bitcoin and the DXY may seem unrelated at first glance, there is evidence of a negative correlation between the two.
One reason for this correlation is that Bitcoin is often viewed as a hedge against inflation and a safe haven asset in times of economic uncertainty. As the value of the US dollar weakens due to inflation or other factors, investors may turn to Bitcoin as a store of value.
Additionally , monetary policy decisions made by the Federal Reserve can have a significant effect on the value of the US dollar. When interest rates are low, investors may seek higher returns in alternative investments, such as Bitcoin. On the other hand, when interest rates are high, investors may prefer to hold US dollars, leading to a positive correlation between the DXY and Bitcoin.
Lastly , another factor influencing the correlation between the DXY and Bitcoin is the increasing use of Bitcoin as a means of payment and store of value in countries experiencing economic turmoil. In these cases, a weaker local currency may drive demand for Bitcoin as a more stable alternative, leading to a negative correlation between the DXY and Bitcoin.
So, how can traders make use of this information?
One way is to monitor the DXY and Bitcoin charts and look for signs of correlation or divergence. For example, if the DXY is showing signs of strength, traders may consider reducing their Bitcoin positions or even shorting Bitcoin. Conversely, if the DXY is showing weakness, traders may want to increase their Bitcoin positions or go long on Bitcoin.
Furthermore, traders can also use technical indicators, such as moving averages and Relative Strength Index (RSI), to identify potential trend reversals in the DXY or Bitcoin.
By combining technical analysis with an understanding of the correlation between the DXY and Bitcoin, traders could make more informed investment decisions.
Ultimately, the negative correlation between the DXY and Bitcoin is a crucial relationship that traders should monitor. And by understanding the factors that influence this correlation, traders can make informed investment decisions and adjust their strategies as market conditions change.
NZDUSD Outlook 7th March 2023The NZDUSD traded lower before the US market session as the price broke below 0.62 to test the 0.6170 intermediate support area.
However, due to the overnight weakness of the DXY, moves to the downside was sustained as the NZDUSD reversed strongly to reclaim and trade beyond the 0.62 resistance turned support level.
With the Reserve Bank of Australia (RBA) interest rate decision due today, the volatility and directional bias of the NZDUSD could be heavily influenced due to its correlation with the AUDUSD.
While the AUDUSD usually drops following an interest rate decision from the RBA, the most recent decision in February saw the AUDUSD climb briefly higher.
Therefore, if this upward move continues for the NZDUSD, the price could retest the 0.6260 resistance level, however, watch out for a potential hurdle at the 0.6234 price level which aligns with the 61.8% Fibonacci retracement level.
CURRENCY CORRELATION HEAT MAPCurrency correlation is important to understand in forex trading because it could impact your trading results often without you even knowing it.
In this post, I will share some information about correlations in forex trading and how you are able to use it to your advantage to avoid unnecessary losses. Throughout my journey as a beginner trader, I have bought or sold 2 different currency pairs many times without knowing they are negatively correlated just to let the gains be offset by
the other pair.
My aim in this short post is to bring awareness about the positive and negative correlations between the currencies, specifically the most traded major pairs in the forex market.
What is correlation in forex trading?
A foreign exchange correlation is the connection between 2 different currency pairs. There is a positive correlation when 2 pairs move in the same direction, a negative correlation when they move in opposite direction, and no correlation if the pairs move with no relationship. In order to understand the relationship between 2 currencies, you must know the correlation coefficient and how it relates.
What is correlation coefficient?
A correlation coefficient represents how strong or weak a correlation is between 2 forex pairs. They are expressed in values and range from -100 to 100 or -1 to 1, with the decimal representing the coefficient. The higher the value of the correlation coefficient will largely reflect the movement of the other pair.
See Figure 1. Correlation Heat Map
For example, If the reading is -70 and above 70, it is considered to have strong correlation between the two. Readings anywhere between -70 to 70 means that the pairs are less correlated. With coefficients near the 0 mark, means little or no relationship with one or another. As traders, implementing risk management in our trading plan also reflects to correlations as you may think its a good ides to buy 2 highly correlated pairs thinking you will double your profits when in reality you may lose double the money as both trades could end up in a loss as you're doubling your risk.
Figure 2 . Positive Correlation: EURUSD / AUDUSD
As we can see on this line chart between EURUSD / AUDUSD, both pairs have a strong correlation coefficient as they are moving in almost the same direction. The correlation coefficient is valued at 75 as noted on the heat map. For example, if you place a buy order EURUSD and place a sell order on AUDUSD, expect a win and a loss in most cases.
Figure 3. Negative Correlation: EURGBP / GBPUSD
On this line chart, we can see that both of these parts are moving in opposite directions which are showing a negative correction between the two which in fact is also known as an inverted correction. The correlation coefficient is valued at -90 on the heat map which means if you place a buy order on EURGBP and a place a sell order on GBPUSD you may double your profits, but again you're doubling your risk.
Figure 4. No Correlation: GBPJPY / USDJPY
This line chart shows that both of these pairs move in the same direction with a correlation coefficient of -9 which has almost no correlation. If you place a buy order on GBPJPY and place a sell order on USDJPY, one of these trades will most likely end up in a loss. The pairs that have no correlation usually have different and separate economic conditions therefore coefficient values tend to be lower.
In summary, understanding which pairs are correlated with one another will be able to help build your strategy and improve your trading results. Every trading strategy NEEDS to have Risk Management implemented in it as it is the key to sustainability for the long run.
Trading is a marathon NOT a sprint.
To learn more about forex correlations and their relationships, please see the following links.
References:
www.tradingview.com
ca.investing.com
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Higher Yields May Cause Bigger Correction On DXYHigher yields may cause a bigger correction on DXY, as yields can be still looking for wave 5 by Elliott wave theory.
Yields higher, USD strong, stocks down. Risk-off flows may not be over just yet if yields are in fifth wave. However, when yields will make new high and then top after 5th, thats when DXY can complete B/2 rally, with a lower high, when focus will shift away from US to other CB. However, of course, wave 4 on yields can get more complex if current trendline support is broken, so wave B/2 on DXY may take more time to unfold.
Grega
Good news for stocks, bonds are bottoming $JNKAMEX:JNK is an ETF that tracks rated high-yield bonds or "junk bonds". These are the bonds rated Ba1 & BB+ by Moody's Investors Service, Inc., & Fitch Inc. respectively.
The bullish divergence with the ROC is pointing out that a bottom is near.
Bonds bottoming is a good sign for the market and breakout to the upside should confirm a healthy uptrend for stocks.
This ETF has a high correlation with the AMEX:SPY ; 0.7021 for the last 3 years, so, let's wait and see.
EURUSD 1 HourPrice has pulled back today & reached the previous lower high of the downtrend, along with the 50 fibonacci retracement & is at the previous structure support zone now turned into potential resistance. From this region here, I am looking for signs of a bearish reversal for price to resume the Current downtrend for a lower low into the key area of support
MSCI EM and DXYDollar and EM markets.
A non Brainer with 1:1 correlation.
The DXY (black line) is inverted to show the coorelation with EM.
Strenthening Dollar means weaker EM and vice versa.
Soince with rate ris eback inti the limelight, the DXY should rally an dEM would be under pressure. The weakness of Chines Equity markets which makes up 31% of MSCI EM would also be a factor.
NAS100 DailyPrice has reached a key area of previous structure now retested as new support rejecting off the previous higher low of the current uptrend. There are also 2 alignments of fibonacci in this key region, & this upcoming week I am anticipating for price to resume the uptrend for a higher high into the key trend line resistance above, which aligns with major resistance as well looking left.
The correlation between US Interest Rates and The US Dollar (DXYInterest rates and USD strength are positively correlated.
An increase in US interest rates will typically result in a strengthening of the USD.
The reason is...
Foreign investors tend to flock to US assets, such as bonds and fixed bank rates for higher returns.
Higher demand for US assets drives up their price, and as a result, the USD strengthens.
As for the relationship between USD strength and US stock market prices, it is more complex and can have both positive and negative effects.
On one hand, a strong USD can make US exports less competitive, reducing demand and potentially leading to a decrease in corporate profits.
This can weigh on stock prices. On the other hand, a strong USD can attract foreign investment into US stocks, driving up demand and prices.
There are other reasons for the correlation such as:
Interest rate differentials
When interest rates in one country are higher than in another, capital tends to flow to the country with the higher interest rates.
This results in an increase in demand for the currency of the country with higher interest rates, strengthening its currency i.e US Dollar.
Inflation expectations
Interest rates are also closely linked to inflation expectations.
When interest rates rise, it is generally expected that inflation will rise too, which makes the currency more attractive to investors.
Trade flows
The USD is the currency used in most international trade transactions, and as a result, changes in trade flows can have a significant impact on the value of the USD.
BTC & USDT.D - Strong Rejection Ahead!Hello TradingView Family / Fellow Traders. This is Richard, as known as theSignalyst.
I always keep an eye on USDT.D to feel the overall crypto market.
📚 And today I want to show the correlation between BTC and USDT.D
📌 BTC has been stuck inside a range in the shape of a flat rising broadening wedge (in red)
BTC is currently approaching the lower bound / red trendline, so I will be looking for buy setups on lower timeframes. (to be confirmed after breaking an H1 high upward)
The bears would take over IF BTC break below the lower red trendline and zone. In this case, a movement till the demand zone 21500 in green would be expected.
📌 On the other hand, USDT.D is stuck inside a range between 6.5% and 7.0% support and resistance. And we are currently approaching the upper red trendline.
Always follow your trading plan regarding entry, risk management, and trade management.
Good luck!
All Strategies Are Good; If Managed Properly!
~Rich
Does SPX lead BTC or the other way around ?The BTC and SPX correlation has been going on for a while. I have been spending time on studying BTC correlations as the market classification of BTC seems to keep changing, as of lately it seems that it is shifting from a risk-class asset to a store-of-value asset "this shift will probably take some more time", the reasoning here is that populations from emerging markets are using it as such whether we agree or not "alongside stablecoins, but the UST fiasco scare people of".
Back to the original topic. In the chart attached, I can see BTC hitting swings before SPX does "forget about FTX meltdown", from that it seems that BTC does lead SPX and not the other way around. My reasoning is that the same traders are acting upon BTC 24/7 with no holidays/weekend breaks and as such it shows the market sentiment before it appears on SPX charts that are bound to regular operating hours. What do you think ?
Like the post for further updates.
LINK - DYDX - SUSHI || Coincidence? I don't think so Hello TradingView Family / Fellow Traders. This is Richard, as known as theSignalyst.
As per my trading plan / routine, I update my charts and alerts every Sunday night to be ready for the upcoming week.
Tonight, while going over all the charts, I noticed that these there assets / tokens are forming similar price action.
LINK - DYDX - SUSHI || Weekly Chart:
After rejecting a support zone and round number, these three have been stuck inside a range in the shape of a double bottom pattern.
🏹 For the bulls to take over long-term, we need the double bottom pattern to get activated by a momentum candle close above its neckline in gray.
Meanwhile, until the bulls take over, we would be stuck inside the range.
📚 We know that the entire crypto market is correlated in a way or another, but these three took my attention as the similarity is huge.
what do you think? is it a coincidence? are these three somehow related?
Always follow your trading plan regarding entry, risk management, and trade management.
Good luck!
All Strategies Are Good; If Managed Properly!
~Rich
GJ Sell for 163.4Looking sell from here aligned to a duplicate tl. Also, we have the D100EMA. Considering market sentiment as well as Nikkei alignment at the tl. SP500 is approaching a level of interest for me for a sell after its recent over extension. With this alignment occurring, this zone is a hot spot for a sell for me in GBPJY. A modest downside target is expected when all this alignment occurs. Targeting a 300+ pip move.
CADJPY 25th JANUARY 2023Crude oil prices in most of the world's physical markets have started the year with a rally, as China has shown signs of buying more, and traders fear sanctions against Russia could tighten supplies. Early indications show there has been an increase in activity, which means oil demand will increase. The EU and G7 coalition will cap the prices of Russian products from February 5th.
Commodity Channel Index (CCI) is a momentum indicator used to estimate oversold and overbought conditions of an instrument's market. This indicator uses overbought and oversold to determine entry positions to sell or buy. The level of market saturation can be a signal to detect a market reversal or continuation.
BTC vs USDT.D - Who Follows Who? 👀Hello TradingView Family / Fellow Traders. This is Richard, as known as theSignalyst.
I always keep an eye on USDT.D to feel the overall crypto market.
📚 And today I wanted to show the correlation between BTC and USDT.D
- Last week, BTC broke above the last major high in orange and blue 19k resistance, while USDT.D broke the last major low and 8% support.
- BTC is currently sitting around a strong resistance zone in green 22,000 while USDT.D around a support zone 7%
- For the bulls to remain in control for BTC, we need a break above 22,000, which would be USDT.D breaking below 6.8%
Meanwhile, a rejection would be expected.
And so on... the picture is self-explanatory.
Always follow your trading plan regarding entry, risk management, and trade management.
Good luck!
All Strategies Are Good; If Managed Properly!
~Rich
Correlationships between EURCHF, EURUSD and USDCHF - EXPLAINEDI think I made up that word Correlationship but it sounds good.
As I always mention about correlations. They are only as good as the amount of data and current time position that occurs.
They correlate until they don't. They inverse eventually.
And that's because the economics of currencies are so complex with with exposure of the currencies, compared to the past where theory matched reality.
Anyhoo. Right now and as of the last couple of months we have seen a positive Relationship between
EURCHF and EURUSD
However, there is an Inverse relationship with the two above currencies and USDCHF.
It is common for both the EUR/CHF and EUR/USD to follow as they are European currency pairs.
This means they are likely to be influenced by similar economic factors such as interest rates and inflation in the Eurozone.
With the USD/CHF, it is a cross currency pair of two safe haven currencies.
And so, when the USD rises, it will appreciate against the CHF, and the USD/CHF will increase in value.
Alarming Macro Conditions for BTCLiquidity issues continue and long-term holders are still selling in losses. While many on-chain cycle indicators (eg. realized price) are showing BTC is in the cyclical bottom, on-chain recovering signs are missing.
The yield curve has inverted (the interest rate spread between the 10-year Treasury note and the 3-month Treasury bill). With such inversion preceding prior 8 recessions since 1960s and correlation between BTC and SPX hovering at its all time high level, the global macro condition does not look promising. Furthermore, despite peaked in Q3, the 7.1% U.S. Consumer Price Index (CPI) remains well above the Federal Reserve’s 2% target. With Q3 real GDP stats better than that of Q1 and Q2, the Fed might tighten the leash in the months to come.
The above chart is from my June idea BTC: Don’t DCA Yet . It’s worth noting again that in the entire BTC history, most gains were generated in periods of healthy liquidity from either monetary or fiscal policies. Thus, under continued quantitative tightening and a potential recession on the horizon, the upside for Bitcoin is extremely limited.
