That’s a lot of intermarket correlations to remember so let’s do a quick recap. The price action of currencies is often driven by their relationship with commodities, bonds, and stock indices.
Here’s a neat one-page cheat sheet for you to bookmark and make it easy for you!
|Gold||USD||During times of economic unrest, investors tend to dump the dollar in favor of gold. Unlike other assets, gold maintains its intrinsic value.|
|Gold||AUD/USD||Australia is the third biggest gold producer in the world, sailing out about $5 billion worth a year.|
|Gold||NZD/USD||New Zealand (rank 25) is also a large producer of gold.|
|Gold||USD/CHF||25% of Switzerland’s reserves are backed by gold. As gold prices goes up, the pair moves down (CHF is bought).|
|Gold||USD/CAD||Canada is the 5th largest producer of gold in the world. As gold price goes up, the pair tends to move down (CAD is bought).|
|Oil||USD/CAD||Canada is one of the top oil producers in the world. It exports around 2 million barrels of oil a day to the U.S. As oil prices goes up, the pair moves down.|
|Gold||EUR/USD||Since both gold and euro are considered “anti-dollars,” if the price of gold goes up, EUR/USD may go up as well.|
|Bond yields||Local Currency||An economy that offer higher returns on its bonds attract more investments. This makes its local currency more attractive than that of another economy offering lower returns on its bonds.|
|Dow||Nikkei||The performance of the U.S. economy is closely tied with Japan.|
|Nikkei||USD/JPY||Investors consider the yen as a safe-haven and tend to seek it during periods of economic distress.|
And if you’re looking for a more in-depth look at intermarket analysis, check out Intermarket Analysis: Profiting from Global Market Relationships by John J. Murphy (Amazon Affiliate Link) if you want to further your study and add another skill to your trading tool box!