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!
| If | Then | Why |
|---|---|---|
| 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
|
Over 25% of Switzerland’s reserves are backed by gold. As gold prices go 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 go 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 offers 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. |
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