Monday, April 2, 2012


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In this article we will discuss the correlation between DOW and EUR / USD. We’ll see if this correlation exists. We will try to find it is true that the two markets share the same currency and people. We find that these are all false. Some examples of graphs help us understand why.
We’ll start first with the type of relationship between Dow and the EUR / USD (directly or indirectly proportional) and with the degree of correlation. We’ll see how to get a valid strategy for both Dow and the EUR / USD or any other currency pair. We will see that it suffices to analyze a graph and then find out about the other tables (ie, what price should have any other financial product at a time to time). At the end we will of course draw conclusions.
1. Is there a correlation between DOW and EUR / USD?
look at the graphs below:

The table is fir for Dow in January-August 2007 . The second is for EUR / USD during the same period. Are they correlated?
It does not seem to be a correlation when looking at the details. The degree of correlation varies from one time to another. When looking at the bigger picture, there seems to be a correlation, right?
First we have a large increase until May, then a decrease in the short and high in July and a steep slope downward in August This is the same for both cards.
observe an earlier period in the past: />

This is the period between January and July 2003. Again we can not find a valid link between short time intervals, but when we look at the monthly trend, we can! After the month of January when the cards are different, we see a neutral trend in February, is low in March, an upward trend up in June and a slight decrease in July. It is the very image of the two large tables.
Correlation or not?
2. What kind of correlation there?
The correlation is directly proportional. Whenever Dow raises EUR / USD is developing well. Every time Dow has a period of down, EUR / USD goes down too.
Graphs long range of time are very clear, but they do not offer sufficient support. Are most appropriate maps to shorter periods. The intraday charts are the best.
study period between 2007 and 2008 with the help of daily charts! When the trend is neutral, you will find differences, but when the trend is strong and the money moves from one financial product to another within seconds, you find the good correlation.
3. Is there enough to analyze the evolution of a single financial indicator for all to know?
We think so! The logic is simple. When Dow was up, it means that the U.S. economy is going well. If the economy is growing, this means that the dollar should be stronger. If the currency goes up, then EUR / USD will fall. That is why the intraday charts show a proportionality indirect. Dow and EUR / USD is in direct proportion to the middle and long covers
When, in 2007, the Fed began cutting the benchmark interest, USD became the currency trading report. This point of the front of the correlation is directly proportional to time become also includes.
4. Conclusions:
If an intraday analysis of the Dow and the S & P 500 shows that these indicators will go down, we can assume that the EUR / USD parity will also decrease. Having this information and the information provided by other elements of technical analysis, you find the right signals to enter and exit the market and closing the result.

Dharmik team.


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