Why do FX pairs follow each other?

CAD and CHF rallying. Close GBP AUD and EUR with a view to re-entering later in the session.

The 6 currency pairs that we follow all move together to some degree because of the relationship between their economies. This degree of co-movement is called "correlation" and can be calculated as a number between 0% and 100% where 0% means there is no co-movement and 100% means the two currencies move the same way all the time. So for example, if we see CHF moving higher, then we should expect EUR to be moving lower because these two currencies are highly correlated. So when we Buy EUR again, we want to see CHF falling and ideally have a Sell signal in CHF too!

But correlation is a double-edged sword: if all the pairs move together to some degree, then when one position turns against you, most likely there will be others too. And all of this happens at the same time. This is why you need to place your stops and targets as soon as you place an order to protect you from losses and sometimes to reap sudden unexpected gains.