The study of relationships between different financial markets (currencies, bonds, commodities, equities) to gain directional insights for forex trading.
What Is Intermarket Analysis?
Intermarket analysis examines the connections between asset classes. Currency, bond, commodity, and equity markets influence each other through economic relationships. For example, rising US Treasury yields tend to strengthen USD because higher returns attract foreign capital. Falling oil prices often weaken CAD because Canada is a major oil exporter. These correlations provide forex traders with additional context beyond standard Technical Analysis.
Key Intermarket Relationships in Forex
USD/CAD and crude oil prices tend to move inversely (oil up, CAD strengthens, USD/CAD falls). AUD/USD correlates with iron ore and copper prices due to Australia's mining exports. USD/JPY often tracks the US 10-year Treasury yield. Gold and USD frequently have an inverse relationship. EUR/CHF tends to mirror European equity sentiment, with risk-off moves strengthening CHF.
Applying Intermarket Analysis
If crude oil is surging but USD/CAD has not yet responded, intermarket analysis suggests USD/CAD may soon decline. This lead-lag relationship creates trade opportunities. Combine intermarket signals with Fundamental Analysis (such as Central Bank policy direction) and technical chart patterns for well-rounded trade ideas. Intermarket analysis is especially valuable around major economic events when correlations temporarily strengthen or break down.
Related Terms
Correlation
A statistical measure of how two currency pairs move in relation to each other. Correlation ranges from +1.0 (move identically) to -1.0 (move in exact opposite directions), with 0.0 meaning no relationship.
Technical Analysis
The study of past price action, volume, and chart patterns to forecast future market movements, based on the premise that price reflects all available information.
Fundamental Analysis
The evaluation of economic, political, and financial factors that influence a currency's intrinsic value, including interest rates, GDP, employment data, and central bank policy.
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