Crypto

Bitcoin »An asset for foreign currency traders in forex

Bitcoin can be an important asset for traders to have in their arsenal

Bitcoin has been on fire since the beginning of October (also the beginning of the third quarter), and traders use September (also at the end of the second quarter) to make a profit. Bitcoin price formed an AB = CD retracement before falling back to its highest level since May 10 this week! The price of cryptocurrency n. 1 formed a shooting star during the daily period of October 14, indicating that it may be ready for a retreat. The RSI is also deviating from the price. The horizontal resistance above is at the May 10 highs at 59,603, the Fibonacci extension at 161.8% from the September 7 highs to the September 21 lows at 61,261.92 and finally the April all-time highs at $ 64,895.22. If Bitcoin price corrects, there is support below the September 7 highs near $ 53,115.06, then a quick spike from October 10, up to $ 51,000. Furthermore, the 50-day moving average is the next support level at $ 48,238.22.

Bitcoin daily chart (BTC / USD)

Source: Tradingview, Stone X

Correlation coefficient

However, if traders do not have access to Bitcoin trading, they can still use the price of cryptocurrency n. 1 to help them trade currencies. Correlation is a word used to describe a relationship between two assets. The correlation coefficient describes how one asset performs relative to another. A correlation coefficient of +1.00 means that there is a perfect positive correlation and that the 2 assets always move in the same direction. A correlation coefficient of -1.00 means that there is a perfect negative correlation and that the 2 assets are always moving in opposite directions. A correlation coefficient of 0.00 means that there is no correlation between the 2 assets. Also, a correlation coefficient of +0.80 is considered a strong positive correlation between 2 assets. A correlation coefficient of -0.80 is considered a strong negative correlation. Correlations can and do change over time.

Bitcoin / Forex correlation coefficients

Currently, in certain daily time periods (longer term), Bitcoin has strong correlation coefficients with commodities, such as wood (+0.84), RBOB gasoline (+0.93), and soybeans (- 0.87). Therefore, it is not surprising that Bitcoin also has high correlations with certain commodity-related currencies. Here are some examples:

AUD / USD (Australian dollar / US dollar)

The AUD / USD pair began to rise on September 30 in forex, at the same time that Bitcoin began to rise from its recent lows. Breaking the 0.7170 lows, the pair broke resistance at the 50-day moving average, horizontal resistance, a descending trend line dating back to May 10 and the 38.2% Fibonacci retracement of the highs since May 10. May to the minimum. August 20 around 0.7408. The current correlation coefficient on the daily horizon is +0.84. Therefore, if traders are looking for a directional trade in the AUD / USD pair, they can use the direction of the Bitcoin price as a tool to help them determine the direction in which the AUD / USD pair can go.

AUD / USD daily chart

forex aud / usd 17102021Source: Tradingview, Stone X

USD / CAD (US dollar / Canadian dollar)

The USD / CAD pair began to move lower in the currency market on September 20, from a high of 1.2896. However, the pair started to gain momentum for the September 30 selloff. On its downside move, the pair broke below an upward sloping neckline of a head and shoulders pattern, the 50 and 200 day moving averages, and the 38.2% Fibonacci retracement and 50% retracement of the move from the lows of June 1. in the summits of August 20. On October 14, the pair also broke the horizontal support at 1.24152 and the Fibonacci retracement level of the 61.8% period mentioned above at 1.23667. The current correlation coefficient for the daily period is -0.87. Therefore, if traders are looking for a strongly directional position in the USD / CAD pair, they can use the direction of the Bitcoin price to help them! (Remember that a negative correlation means they move in opposite directions.)

USD / CAD daily chart

forex usd / cad 17102021Source: Tradingview, Stone X

USD / RUB (US dollar / Russian ruble)

The USD / RUB began to fall seriously in the forex market after hitting a high of 78.58 on April 6. On May 6, the pair broke below a symmetrical triangle dating back to the pandemic highs of March 2020. USD / RUB continued to hit lower highs after the breakout and did not close above the 200-day moving average. from April 30. The USD / RUB has not closed above the 50-day moving average since August 26. On October 14, the pair traded at its lowest level on the forex market since July 2020, beating June 11 lows at 71.55. The current correlation coefficient for the daily period is -0.87. So, if traders are looking for a strong directional trade in the USD / RUB pair, they can use the direction of the Bitcoin price to help them!

USD / RUB daily chart

usd / rub forex 17102021Source: Tradingview, Stone X

Other examples

These are just a few examples of currency pairs strongly correlated with Bitcoin over a daily period. Other currency pairs to consider are:

  • EUR / GBP (-0.90)
  • CAD / JPY (+0.84)
  • CAD / CHF (+0.87)
  • AUD / JPY (+0.86)
  • AUD / NZD (+0.86)
  • EUR / AUD (-0.95)
  • EUR / CAD (-0.89)
  • EUR / CHF (-0.84)
  • EUR / NOK (-0.89)
  • GBP / AUD (-0.81)
  • GBP / JPY (+0.82)
  • EUR / RUB (-0.87)

Bitcoin can be a great asset for traders to have in their arsenal. The current correlation coefficient between Bitcoin and many forex currency pairs is strong at the moment.

Therefore, forex traders can use the Bitcoin address to help them determine the possible direction of highly correlated currency pairs.

By Joe Perry, Forex.com » Official site

Disclaimer: The information and opinions contained in this report are provided for general information only and do not constitute an offer or solicitation regarding the purchase or sale of currency exchange contracts or CFDs. Although the information contained in this document has been taken from sources considered reliable, the author does not guarantee its accuracy or completeness, and does not assume responsibility for any direct, indirect or consequential damages that may result from the fact that someone trusts such information.

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Disclaimer: The information and opinions contained in this report are provided for general information only and do not constitute an offer or a solicitation to buy or sell currency or CFD contracts. Although the information contained in this document has been taken from sources considered reliable, the author does not guarantee its accuracy or completeness, and does not assume responsibility for any direct, indirect or consequential damages that may result from the fact that someone trusts such information.

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