Interconnection Between Markets And How To Exploit It In Circulation Study the correlation between the known English the term markets “intermarket Correlation”, based on United Trading Software study of existing correlations between financial assets among themselves in one market or different markets. Along the lines that exist between the stock correlations among them, or the existing correlations between the bond market and the stock market or the commodities market and the foreign exchange market.
The many foreign exchange traders in the Forex market using the interrelationships that exist between commodity market and the currency market, to increase the likelihood of success of their transactions. For example, there is a correlation between the currency of the Canadian dollar relationship (CAD) and the price of rolling oil in the futures markets because of the importance of black gold in the the Canadian economy, which is one of the largest exporters of oil. While the Japanese yen is the inverse may be affected because oil is one of the most products imported by Japan. In this article we will talk about the existing relations of interdependence between foreign currencies and commodities traded in the futures markets, because it is a more interdependence between the markets used by 100K Factory Revolution Bonus traders to make their decisions in trading relationships.
Choose the interrelationship between the currency and commodity trading
Not all the interrelationships that exist between foreign currencies and commodities can be relied upon in making trading decisions independently of the other things that affect the market such as the events of political, economic numbers, liquidity and price differences.
For example, Canada is one of the largest exporters of oil and consequently its economy is affected by oil prices in the international market and the quantity that you export. While Japan is one of the most oil-importing countries and thus more oil prices affect the performance of its economy. As a result of the significant impact of oil prices on Japan’s economy and the economy of Canada, there is a positive correlation between the currency pair Canadian Dollar / Japanese Yen (CADJPY) and the price of oil. This relationship Yemen also affect the currency pair US dollar / Canadian dollar (USDCAD). But the currency pair CADJPY knows less liquidity and price differences compared to the largest pair (USDCAD). Since oil is priced in US dollars worldwide, the value of the dollar volatility affects the price of oil (and vice versa), so the currency pair (USDCAD) can be monitored to exploit the relationship of interdependence, given that Canada’s largest oil-exporting countries, while the United States It is the largest importer of him.
The chart shows the existence of periods in which the spacing between the pair CAD / JPY price and the price of oil. In this drawing oil prices have been modified, while the graph below, where oil prices unadjusted shows a relationship strong correlation between the currency pair CAD / JPY and the price of oil during the year 2010. The evidence on the necessity of monitoring the interrelationships in real time with real time data.
Another example of interdependence relationships between foreign currencies traded in the forex market traded in the futures market and commodities, the Australian dollar is a link at the price of gold. . Australia is one of the largest producing countries, the yellow metal in the world, what makes the Australian economy under the impact of the changes that knows the price of gold in the global markets and the quantity that can be exported. Add-on however, that New Zealand is the largest dealers with Australia and its economy is linked to the economy of Australia, which means that the New Zealand economy will be affected also by fluctuations in gold prices in international markets.
Australia is the fourth largest exporter of gold (2008), while the United States is the third largest importer of gold (2009), and therefore it can exploit the correlation between a pair Australian dollar / US dollar (AUD / USD) and a pair dollar New Zealand / US Dollar gold prices in making trading decisions.
And you can also note the presence of one of interdependence between the pair AUD / USD and oil prices in the futures market in the image below that between 2007 and 2010, despite the fact that Australia is not considered one of the major countries that export oil, and up until the month of September where he is no longer of this relationship any effective.
Interdependence between foreign currencies and commodities relations (or even different asset traded in other markets) may change with the passage of time. The trader can search for coherence between foreign currencies and commodities relationships by searching for major countries exporting a commodity and major countries that import this item, and therefore analyze and study how to move the currency pair that combines the processes of the exporting country and importing state, compared with the high and low price of the commodity.
The effectiveness of the correlation between foreign currencies and commodities
It is very important to realize that having a correlation between a pair Foreign currency and commodity (or any two originals how was their kind), does not mean at all that this relationship exists is always, but you should only monitor these assets and foreign currency associated with each other, because there will be times when it becomes this is where the negative correlation.
Knit relationship that may exist between a pair of currencies and commodity may be fairly strong during the year, for example, to become then this relationship is effective after that. So rolling to know when this interrelationship be positive and when to be ineffective. And it provides trading platforms at the moment many of the tools and indicators that enable the trader to monitor trading relations between the various assets in many markets. And a simpler strategy used by traders are exploiting spacing happening between two originals in the short term when there are two thread on the level of the general trend, so that the rolling to enter into a deal and wait for the return originally trajectory similar to the other out, which collects its interrelationship relationship.
Rolling that time known to enter and exit positions when trading based on the correlations between pairs of foreign currencies, commodities and the exploitation of winning the spacing between the two copies in the short term. It must also realize some of the things the following: – Are there any correlation at the moment between foreign currency and a commodity? – Does a trend led by the native concerned? – Is there a spacing between the native? For example, the native may be the one to continue to rise while the other parent is unable to walk in the same direction. In this case, we are waiting for the return of the native to walk in the same direction.
The interrelationships between foreign currency pairs traded in the futures market and commodities is not an exact science, and also applies to the interrelationships between assets in other markets, these relationships may last only for a limited period, so they have to rolling to be and understand what is going on in the market and when it is in the case of the native temporary spacing and when to be interrelationship between them has ended.