EUR/USD and Dollar Index INVERSE relation .....

[md2324]

Just have a pretty quick and straight forward question ..... The Dollar Index and EUR?USD seem to trade nearly 100% Inverse Correlation to each other.

Given this .... Would it then make sense to Trade them both at the same time ( so long as the 2 charts show you that the Inverse correlation between the two of them is still there ) ?

So if we get a signal to go Long the DX.... Then Automatically go Short the EUR/USD and make Profits from both trades

In theory this would work, correct ?

Appreciate any insight into the Question at hand

 

[md2324]

Hi ETcallhome ,
Thank you for your reply

I have attached the Charts of both the USD ( DX ) and the EUR ( 6E ) .... The EUR/USD looks Identical to the 6E DAILY chart

Thoughts ?

 

[ETcallhome]

Hi ETcallhome ,
Thank you for your reply

I have attached the Charts of both the USD ( DX ) and the EUR ( 6E ) .... The EUR/USD looks Identical to the 6E DAILY chart

Thoughts ?

yeah, I deleted that post after I re read what you posted. But yes, DX is very heavily weighted in eur.usd. You threw me off when you said they move inversely. It's like bonds and rates, some say up some say down.

But no. I don't see why that would be a good strategy unless you are trading the EUR vs DX spread.

 

[md2324]

Can you explain a bit, on the following type of trade would work ...... trading the EUR vs DX spread ?

I have heard of Spread Betting via the markets, but have not seen a real life example of how this type of trade works

Thank you

 

[ETcallhome]

Can you explain a bit, on the following type of trade would work ...... trading the EUR vs DX spread ?

I have heard of Spread Betting via the markets, but have not seen a real life example of how this type of trade works

Thank you

well first of all, there's no sense in taking an entry from one and doubling up on another. Why not just put on twice as much of one? However if you were following the DX vs EUR spread you may find an anomaly that interests you. It would have to be pretty big, because the computer has already gobbled up anything that is close. It's no mystery, you can go to the ICE website and see exactly what weight the EUR carries in the DX.

 

[eurusdzn]

Given that a long USD is heavily 57% (?) Weighted in euros it would effectively cancel/offset 57% of the short EUR/USD. You would then be be long the remaining components of the USD index and short EUR/USD an equivilant 43% of its original position size.
This of course depends on equal sized legs originally. Dollar neutral.

 

[ETcallhome]

57% is pretty heavy for just one currency. That's why a lot bitch that DX is Eurocentric.

 

[Unequivocaltim]

One could say "I'll take a position on the visiting team to lose and a position on the home team to win"?.
My take was: which is the most economical route that saves overhead to achieve the same result?

Na zdrowie,
Tim