Correlation is the strength and direction of the relationship between two variables. It is useful concept adapted from statistics to trading, and when used for the analysis of market events it simply measures the tendency of two assets to make similar movements over time. To trade forex we need to establish as many relationships between different variables (between bonds and currencies, stocks, and forex, and currencies themselves) as possible, and correlation is one way of achieving this aim.  
 

  Correlation is expressed as a number between -1 and 1. Values close to zero signify that there is a weak correlation between the two variables. In other words, a movement in one variable has no predictable reaction in the other. Values close to -1 mean that there is a strong inverse correlation. For example, when the variable x (say the EURUSD pair) makes a five point movement to one side, the variable y (USDJPY pair, in example) will make a movement of four-five pips in the opposite direction. Finally, values close to 1 suggest positive correlation. In this case, movements in one variable are matched by movements by the other pair of similar or equal size, and in the same direction      
 

  It is important to understand that while correlation is often used by traders to predict future price action, there is nothing in the definition of  correlation that says it will last over a specified period of time. Correlation describes relationships between variables as they are, but it can break down at any time for any reason. It is the duty of the analyst to establish the causes of the relationships. This is best done through fundamental analysis, but it is beyond the scope of our present study. 
 

  In many cases correlation is the manifestation of some underlying fundamental dynamics. If a strong correlation is observed between two different assets, this is either because of a strong, organic relationship between those assets, (such as that between some commodities and the CAD/USD pair), or because of very strong and long lasting trader perceptions (such as the relationship between oil and the EUR/USD pair). Regardless of the causes, it can be useful because it helps us reduce the complexity of the market. Currency pairs that have a very strong correlation between them, for example, will behave very similarly, and can be regarded as being the same for most purposes.   
 

  Most traders make use of correlation in carry trade strategies, or for managing risk exposure through hedging in different currency pairs. If you want to learn more about the subject, some broker websites and other forex related sources offer forex courses which you can take at your convenience. The important point is knowing that correlation only describes the present market conditions, and it never says anything certain about the future. It does make a suggestion, but never an assertion.