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The strength indicators allow me to look for currency correlations. Currently, EUR and CHF are extremely positively correlated. AUD and NZD are traditionally correlated (although events in China seem to have affected AUD over the last few months, diluting this correlation), while USD and JPY seem to move in and out of positive correlation. CAD is something of a wildcard; it occasionally sides with USD but generally floats 'somewhere in the middle'. A couple of years back, GBP and EUR were positively correlated, but this is no longer the case. Recently, GBP has been siding with USD and JPY, as very strong, while NZD (and to a lesser extent, EUR and CHF) have been weak. Recent long positions on GBPNZD have been extremely profitable.Understanding correlation is a great adjunct to any trend-following strategy. Trading strong vs weak simply tells the trader which pair to trade, and can therefore be used as an independent add-on to any strategy,without affecting the strategy itself, but further augmenting any edge that is provided by the strategy.
............................by Hanover-The programmer of the CSM
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