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Correlation Analysis Report – EUR/USD & Gold 23 Mar 21

In our decade of forex trading analysis, we always believe that to achieve success in forex trading, one has to venture out beyond the forex chart.

You see, the market is a web of intricately connected relationships.

The US dollar may be strengthening but the source can be a weakness in the Euro economy.

In another scenario, the US dollar is strengthening despite disappointing economic data from the USA. Why? Because investors are risk-averse and piling up on Gold denominated in US dollar.

The demand for the currency to buy gold inevitably pushes the price up.

As you can see, it is impossible to understand these dynamics without broadening your knowledge and understanding of the market.

Correlation Analysis EURUSD Gold

Find above a snippet from our Premium Analysis – Correlation Analysis Report.

We observe a divergence around September 2020 as Gold drops in value while the EUR/USD remains flat.

In this instance, Gold is weakening due to the increase of confidence in the economic climate.

Global efforts to fight the pandemic accelerated and vaccines were making progress. This led to some easing of apprehension.

Interestingly, we start to see the EUR/USD follow Gold at the beginning of 2021. The US dollar is strengthening versus the Euro currency.

You may be wondering why are we almost certain that this is not because of some risk aversion. The answer lies in the correlation.

The price of Gold continues to drop, indicating weak demand while the S&P 500 (Not shown here but included in the full Premium Analysis – Correlation Analysis Report) continues to climb.

If one is prudent about this, it suggests that attempts to hold a long position in the EUR/USD may be a fool’s errand.

We also get further indications from the economic developments of the USA and Euro Region. The US Federal Reserve is seen to be showing signs of a tightening monetary policy versus the European Central Bank’s continued accommodative policies.

Investors usually favor a tightening currency in hopes of a higher interest rate.

Do continue to monitor the wealth of market clues available to achieve forex success. Members should log in to view the latest Premium Analysis – Correlation Analysis Report immediately.

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