Correlation of Different Markets with Forex: Cheatsheet
One of the biggest things you should understand as a trader is prices don’t just go up and down (well, maybe on a really small timeframe they’re more chaotic). They’re usually backed by some actions, data and things happening in other markets. This all creates general economic tendencies. But how do we know what affects dollar/currency pair and how? Well, here is a quick cheat sheet for that case. More importantly with an explanation of why. 😊
USD and Gold (negative)
Investors prefer to abandon the dollar in favor of gold during times of economic uncertainty. Gold, unlike other assets, retains its inherent worth.
Gold and NZD/USD (positive)
New Zealand (number 25) is a major gold producer.
Gold and AUD/USD (positive)
Australia is the world's third-largest gold producer, exporting around $5 billion worth of gold each year.
Gold and USD/CAD (negative)
Canada is the world's fifth-largest gold producer. When the price of gold rises, the pair tends to fall (CAD is bought).
Gold and USD/CHF (negative)
Gold backs up more than a quarter of Switzerland's reserves. As gold prices rise, the pair falls (CHF is bought).
Oil and USD/CAD (negative)
Canada is one of the world's top five oil producers. It exports 5..5 million barrels of oil per day to the United States. As oil prices rise, the pair falls.
Bond Yields and USD (positive)
Higher bond returns attract greater investment to a country's economy. This makes its native currency more appealing than the currency of another economy, resulting in lower bond yields. Here it’s more about looking out for bond differences between countries. For instance, if bond difference between UK and United States goes down, this will cause GBPUSD fall as well.
Gold and EURUSD (positive)
Because gold and the euro are both considered "anti-dollars," if gold prices rise, the EUR/USD may rise as well.
USD and Stock Market (depends on the market situation, mostly positive)
So, here is a little weird one. Strong stock market is an indicator of a strong economy. So as company gets stronger -> stock price goes up -> attracting more international investors to step in, who have to get local currency in order to buy a local stock -> this cases dump of other currency in favor of the currency we’re intending to buy the stocks with (in our case USD). Seems easy? On the other side, people from the local economy dump their dollar/bond holdings to acquire more stocks weaking the currency itself. That’s why it’s a complicated love story. This correlation is quite different depending on the volumes for both cases.
Enjoy, family! But keep in mind that these tendencies change to some extent as the world economy shifts/develops. Make sure to always stay updated and observe on your own.
USD and Gold (negative)
Investors prefer to abandon the dollar in favor of gold during times of economic uncertainty. Gold, unlike other assets, retains its inherent worth.
Gold and NZD/USD (positive)
New Zealand (number 25) is a major gold producer.
Gold and AUD/USD (positive)
Australia is the world's third-largest gold producer, exporting around $5 billion worth of gold each year.
Gold and USD/CAD (negative)
Canada is the world's fifth-largest gold producer. When the price of gold rises, the pair tends to fall (CAD is bought).
Gold and USD/CHF (negative)
Gold backs up more than a quarter of Switzerland's reserves. As gold prices rise, the pair falls (CHF is bought).
Oil and USD/CAD (negative)
Canada is one of the world's top five oil producers. It exports 5..5 million barrels of oil per day to the United States. As oil prices rise, the pair falls.
Bond Yields and USD (positive)
Higher bond returns attract greater investment to a country's economy. This makes its native currency more appealing than the currency of another economy, resulting in lower bond yields. Here it’s more about looking out for bond differences between countries. For instance, if bond difference between UK and United States goes down, this will cause GBPUSD fall as well.
Gold and EURUSD (positive)
Because gold and the euro are both considered "anti-dollars," if gold prices rise, the EUR/USD may rise as well.
USD and Stock Market (depends on the market situation, mostly positive)
So, here is a little weird one. Strong stock market is an indicator of a strong economy. So as company gets stronger -> stock price goes up -> attracting more international investors to step in, who have to get local currency in order to buy a local stock -> this cases dump of other currency in favor of the currency we’re intending to buy the stocks with (in our case USD). Seems easy? On the other side, people from the local economy dump their dollar/bond holdings to acquire more stocks weaking the currency itself. That’s why it’s a complicated love story. This correlation is quite different depending on the volumes for both cases.
Enjoy, family! But keep in mind that these tendencies change to some extent as the world economy shifts/develops. Make sure to always stay updated and observe on your own.