I like to plot USDXXX and XXXUSD against DXY or Equally Weighted USD Indices like the EWI I prefer because then you can tell if the USD is devaluing faster than the other currency of the named pair, in this case MXN.
First thing I notice is the strong correlation. Even though quoted in USD a pair does not have to correlate that strong if the other currency is volatile as well.
I have added a correlation coefficient (cc) indicator below the chart. Above zero means positive correlation. You can also tell from the cc indicator that USDMXN and DXY correlate positive most of the time, also called strong positive correlation.
There is even some divergence between the two charts, as indicated by the disjointed angle drawing.
Concluding that it is expected USDMXN to drop more than DXY, which I have indicated with the darker red arrow.
General disclaimer applies....
First thing I notice is the strong correlation. Even though quoted in USD a pair does not have to correlate that strong if the other currency is volatile as well.
I have added a correlation coefficient (cc) indicator below the chart. Above zero means positive correlation. You can also tell from the cc indicator that USDMXN and DXY correlate positive most of the time, also called strong positive correlation.
There is even some divergence between the two charts, as indicated by the disjointed angle drawing.
Concluding that it is expected USDMXN to drop more than DXY, which I have indicated with the darker red arrow.
General disclaimer applies....
