Forex Relationships :heart:

[Risk it fora Biscuit]

Hello everybody, I've been reading as much as possible recently and I came across this quotation:

'Look at similar and related instruments to see if the moves confirm each other. So if the cable looks as though it is going up, then $/Yen should be on its way down.'

(Elliott, Nicole. Charting with Candles and Clouds, in Breakthroughs in Technical Analysis, David Kelly)

I had thought about this before - are there any rules governing how prices move between currency pairs?

(I'm trying to use my common sense to work it out, but the fact that every currency exists only in relationship to another one (i.e. a pair) is melting my brain)

 

[Rhody Trader]

The only absolute rule of price relationships between and amongst forex pairs is the triangluar relationship whereby XXX/YYY x YYY/ZZZ = XXX/ZZZ. For example, EUR/GBP must equal EUR/USD x USD/GBP ( 1 / GBP/USD ), taking spreads out of the equation.

The book is basically saying if you see the dollar rise against the pound, you should check to see if it's also rising against the yen as confirmation.

 

[Risk it fora Biscuit]

Gotcha.
That's definitely filled a gap.

I understand that, to the individual price action trader, the pair is all-important. But, sometimes you just need some context to get a sense of the 'market' in your head.

Many thanks,
Mike

 

[Risk it fora Biscuit]

just a note to self:

http://www.trade2win.com/boards/for...rrelation-trading-basic-ideas-strategies.html