Understanding Correlations: The 10 Bullish vs. 10 Bearish Forex Pairs in December 2025
As of December 17, 2025
You might have noticed significant overlap between the “10 pairs poised for uptrends” and the “10 pairs poised for downtrends/pullbacks” from recent posts. Pairs like EUR/USD, GBP/USD, AUD/USD, EUR/JPY, GBP/JPY, AUD/JPY, EUR/GBP, EUR/CAD, and GBP/CAD appeared in both lists.
This isn’t a contradiction—it’s a reflection of how forex markets work in a strong trending environment, combined with **currency correlations**. With the US Dollar Index (DXY) trading around 98.2–99.0 and showing continued weakness (down ~8% YTD amid dovish Fed signals), most non-USD currencies are strengthening against the USD.
Here’s the key: Many of these pairs are **positively correlated** because they share similar drivers (e.g., anti-USD sentiment). This means they often move in the same direction, creating setups where the broader trend is bullish, but short-term pullbacks are possible after extended rallies.
10 Key Correlations Explaining the Overlap
Below are 10 prominent correlations (positive unless noted) among the overlapping pairs, based on typical historical and current market behavior in USD-weak environments:
| # | Pair 1 | Pair 2 | Correlation Type | Why They Correlate |
|---|---|---|---|---|
| 1 | EUR/USD | GBP/USD | Strong Positive (~0.8–0.9) | Both are major USD-quoted pairs; European currencies often strengthen/weaken together against USD on shared risk sentiment and policy divergence. |
| 2 | EUR/USD | AUD/USD | Positive (~0.7) | AUD is a risk-sensitive commodity currency; rallies with EUR in risk-on, USD-weak environments. |
| 3 | GBP/USD | AUD/USD | Positive (~0.6–0.8) | Both benefit from global growth optimism and commodity strength vs. USD weakness. |
| 4 | EUR/JPY | GBP/JPY | Very Strong Positive (~0.9) | Both are “carry trade” crosses; European currency strength vs. low-yield JPY drives parallel moves. |
| 5 | EUR/JPY | AUD/JPY | Strong Positive (~0.8) | Risk-on proxies: Higher-yield currencies (EUR, AUD) vs. safe-haven JPY move together. |
| 6 | GBP/JPY | AUD/JPY | Positive (~0.7–0.9) | All tied to risk appetite; JPY weakens when markets favor growth currencies like GBP/AUD. |
| 7 | EUR/CAD | GBP/CAD | Strong Positive (~0.8) | European strength vs. commodity-linked CAD; similar anti-CAD flows in USD-weak scenarios. |
| 8 | EUR/USD | EUR/JPY | Positive (~0.6) | Shared EUR base; EUR strength drives both higher (though JPY adds carry element). |
| 9 | AUD/USD | NZD/USD (from bearish list) | Very Strong Positive (~0.9) | Commodity currencies (Aussie/Kiwi); highly synced on China data, commodities, and risk. |
| 10 | Any XXX/USD | XXX/JPY crosses | Positive (in risk-on) | USD weakness often coincides with JPY weakness (carry unwinds reverse); boosts both majors and crosses. |
Why the dual outlook? In a dominant USD-weak trend (like now), these correlated pairs rally together → longer-term uptrends intact (bounces from supports). But after sharp moves, overextension leads to synchronized short-term pullbacks (profit-taking or minor USD rebounds).
This overlap highlights why diversification in forex is tricky—correlated pairs amplify trends but also risks!
Correlations aren’t fixed (they can shift with fundamentals), so always check current charts and use tools like correlation matrices. In December 2025’s environment, positive correlations dominate among non-USD currencies.
This is informational only—not financial advice. Forex involves risk; correlations can change rapidly. Trade responsibly.