Intermarket Analysis for Beginners
What is Intermarket Analysis?
Intermarket analysis is a relationship, or a measurable correlation between four major asset classes: stocks, bonds, commodities and currencies.
The majority of forex traders assume that currency markets move in isolation from all the other capital markets... This is entirely wrong as the foreign exchange market underlies every other market in the world, thus creating a complex network of intermarket relationships which dictate the ultimate flow of capital from one market to another.
Understanding these relationships can help you determine the stage of the investing cycle, select the best performing sectors and avoid the worst.
It is an extremely valuable tool for long-term analysis!
The relationship we are focusing today is the between USOIL and USD/CAD.
Why does this relationship exist?
You can clearly see from looking at the chart below that a long-term intermarket relationship is present, one which is negatively correlated.
To round off this post I truly hope this explained the use of intermarket analysis, there are numerous relationships which you can exploit and use to benefit your own trading.
I am available via private message for any questions you may have.
Intermarket analysis is a relationship, or a measurable correlation between four major asset classes: stocks, bonds, commodities and currencies.
The majority of forex traders assume that currency markets move in isolation from all the other capital markets... This is entirely wrong as the foreign exchange market underlies every other market in the world, thus creating a complex network of intermarket relationships which dictate the ultimate flow of capital from one market to another.
Understanding these relationships can help you determine the stage of the investing cycle, select the best performing sectors and avoid the worst.
It is an extremely valuable tool for long-term analysis!
The relationship we are focusing today is the between USOIL and USD/CAD.
Why does this relationship exist?
- Trends in commodities and the U.S. Dollar tend to be negatively correlated, this intermarket relationship implies that if the U.S. Dollar has been falling recently, that fact is seen as bullish for commodity prices (as shown on the chart).
- The price of oil and the value of the Canadian Dollar tend to be positively correlated. This relationship is due to Canada’s status as one of the world’s top oil exporters, selling roughly two million barrels of oil each day to the United States alone. Rising oil prices will therefore tend to reduce the USD/CAD exchange rate as the Canadian Dollar strengthens.
You can clearly see from looking at the chart below that a long-term intermarket relationship is present, one which is negatively correlated.
To round off this post I truly hope this explained the use of intermarket analysis, there are numerous relationships which you can exploit and use to benefit your own trading.
I am available via private message for any questions you may have.
📈 Master the Art and Science of Trading: www.sixfigurecapital.com
Why does this relationship exist?
The price of gold and the value of the Australian Dollar tend to be positively correlated. Australia is the third largest gold producer in the world!
The price of gold and the value of the U.S. Dollar tend to be inversely correlated. This is because investors tend to sell paper fiat currencies like the U.S. Dollar in favour of holding hard assets in times of economic crisis.