CORRELATION STUDY: NFP and EUR/USD

Howdy, traders.....

In this post (and maybe later) I'd like to explain something statistical; correlation study. I myself choose the correlation between NFP data release and EUR/USD. Correlation measures the strength and direction of a linear relationship between two variables, in this case, NFP and EUR/USD. The result will be completed with a scatterplot/ scatter diagram.

How do we interpret a correlation (r) value? It's simply like this, The value of r is always between 1 and -1.

If you get a positive value, it indicates that the correlation has an uphill (positive) trend. On the contrary, if the value is negative, the relationship has a negative trend. If it's zero, it means there's no linear relationship.

I took the NFP data from fxstreet.com and EUR/USD from AGEA with a range between May 2013 until April this year. You can look at the pictures that the r value was 0.0477 which means it hasn't any strong relationship. As a result, The Scatterplot's dots were totally scattered. Since they're scattered, means no pattern of the trend. Once again, they're actually have a weak linear relationship. Despite having a weak relationship, NFP is quite influential in moving the price of USD. That's why I suggest you to make  better combination of data to gain a good result.

FYI, today is the end of April, prepare yourself for the next NFP data release on the first Friday of May.

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GBP/USD HISTORICAL DATA

Alright guys, we're back! It's true when our teacher said "don't forget the history." Last month, we'd learned the EUR/USD historical data. Now, we go to GBP/USD. GBP/USD is widely known as one of the biggest currency pair in the world that it requires your complete attention.

We know that currently GBP/USD is moving higher from day to day due to bad weather in USD. It's a good chance for you to open a buy position. It's all started before the storm struck US in the end of 2013. GBP/USD was at 1.6009 in October last year. Now, we can see there's a significant improvement; GBP/USD is 1.6685 now. You can imagine how many pips you can gain.

History is still history. Some traders believe in price cycle, so do I. We do have to be aware of this. Besides the economic calendar (the schedule of a periodic economic data release), war, natural disaster, election, expectation, etc. surely affect the movement of a pair. We can't just rely on technical analysis. There are greater conditions out there, such as fundamental condition of a country, that can change the position of the pair; anytime and anywhere.

So, what is your prediction for GBP/USD closing price in the end of this year?

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LEARNING EUR/USD HISTORICAL DATA

Beware of the The FED Tapering, they said. Yes, in this beginning of 2014 our attention is distracted by this policy; no more "quantitative easing". We can say that this tapering is able to affect the investment climate including the forex  trading. To me, such policy will change the trendline when it has big impact. That's why we must keep in touch with latest news. I myself pay a great attention especially to an economic policies issued by US government.

But, don't forget about the history of the trendline itself. Learning historical data of a pair is also necessary.

Look at the EUR/USDVchart below:

You can see that EUR/USD has various exits change within one year only. Started from 1.24 and ended with 1.35. Imagine how many pips you can gain. I congratulate you if you bought your EUR/USD. Now, the price is still touching such a high price, between 1.34-1.37.

Let's get back to several years ago. Hmmm, I'd like to go to first quarter of 2010 when the price touched 1.19, how low! And then, look at 2011. The price almost touched 1.5. So, between 2010-2011, EUR/USD made more than 3000 pips. Some professional traders said by imagining the currency at a price before, will be much easier to imagine that happening again. Well, I'm not patient to see what will happen in the end of this year.

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