These 2 pairs are inversely correlated at about 97%.
What does that mean exactly? Well it means that if they were inversely correlated at 100%, they'd be like mirrors and every time eurusd went up a pip, usdchf would go down 1 pip. But it’s 97%, so there’s a slight discrepancy there which I investigated in extensive detail last autumn and which might be one day the subject of another blog (you can download a correlation table from the download page, if the subject interests you).
But I want to you to focus on something which happened today, and it’s the first time I see it happen. Look at those 2 pairs in the pic below, taken a few minutes ago:
What you’re basically seeing is a hedge (or a 97% hedge, if you’re picky).
What happened is that a sell eurusd happened at the same time as a buy usdchf earlier today (this was an anti-hedge). Then usdchf recrossed, the trade was closed and retaken as a short. So basically, now it's become a hedge, so we can’t win here with 2 shorts. One of the 2 is going to start going long, but not both because it’s impossible. And at the same time, the other will be losing money. Doesn’t really matter which one wins/looses. But we’re stuck in a hedge. There are worse things. A hedge means you’re not “makin’” and your not “losin'”. At some point, one will hit its SL but the other will be almost exactly the same amount in profit.
It’s the first time this happens because the moving averages for the 2 pairs are quite different. Ok, so we won’t be making money with these 2, but let’s have some fun and take bets. Which one do you think will win, eurusd or usdchf ????
