AUD/JPY and GBP/USD leading indicator history, 2002-2009

Source: www.forexautomaton.com

AUD/JPY and GBP/USD form a weakly correlated pair, often but not always correlated positively, which many traders would regard to be one of the last suspects when it comes to predictive forex correlations. Nonetheless, in the screening we conducted last summer using the data set from 2002 to early 2008, AUD/JPY was found to form a leading indicator for GBP/USD. The feature was found by studying the time-integrated correlation of logarithmic returns in the two time series. As usual in such cases, a detailed time-evolution study is necessary to tell whether this effect is merely a result of a single high-impact event or a recurrent feature. I extend the period of observation up to April 2009, split it into three time windows of varying volatility, and analyze the time stability of the leading indicator effect.


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