All this correlation data and charts of trailing correlation between crude oil and Euro-USD exchange rates raised some very interesting questions. Take a look at another graph that we ran this afternoon, after seeing the numbers from the previous two posts
If you assumed that correlation between Oil and Euro will ultimately bounce back at some point in time to its historical range, two trade directions are possible. Either oil is mispriced and will collapse to a number between 40 and 50 dollars a barrel, or Euro is mispriced and needs to jump back to the 1.35, 1.39 range.
Which do you think is likely?