Breaking News
You are here: Home » Education » Forex Signals and Inter-Market Relationships

Forex Signals and Inter-Market Relationships

Forex Signals and Inter-Market Relationships

Many new traders make the mistake of thinking that the forex market is a single entity and does not have any relation to the other financial markets.  This is actually incorrect as all the markets affect each other in some way.  The forex market is actually affected by the other markets to a great extent.  When the other markets move there is a high chance that the forex market will as well.  It is important that you know what forex signals to look for at these times.

Market Correlations

All of the markets are linked in some manner.  It is important that you know how the markets are linked and what this ultimately means for the forex market and forex traders.  The best place to start with this is the interest rates of a country.  The interest rates of a country have an effect on the bond prices.  When the interest rate increases the bond price falls.  However, when the prices of bonds fall this affects the prices of stocks.  When bond prices fall the stock prices generally follow.  When bonds and stocks do badly this affects commodity prices.  There is also a correlation between commodity prices and currency value.

There is a complex interplay between all the markets that ultimately affect the forex market.  The reason for this is that the forex market is affected by currency movements which are affected by the movement of money in and out of the country.  When bond prices are low the flow of currency into the country is lower so the value may decrease.

Forex Signals Traders Can Find

Most successful traders will keep an eye on the commodity market more than any other financial market.  The impact of the other markets is not as great on forex prices when compared to the commodity market.  The commodity market generally affects the US dollar the most because this is the currency these commodities are traded in.

There are two commodities that you should focus on when looking for forex signals.  These commodities are gold and oil.  Both of these items are valued in US dollars, but they do affect other currencies as well.  When the price of oil increases you will usually see an increase in the value of the Canadian dollar.  This is due to Canada being one of the main oil produces in the world.  An increase in the gold price generally signals a strengthening of the Australian dollar because Australia is one of the major gold producers.

When This Does Not Work

Of course, you should note that movement on other markets do not always affect the forex market.  The movement of market are just one of the many factors that affect the forex market.  The movement if the markets can easily be offset by another factor that is affecting the market.  A decrease in the stock market may not mean a decrease in the value of the US dollar because there could be another factor that is driving the US dollar up.  It is important that you look at all parts of the forex market and the currency pair you are trading to get a full view of what could happen.


Get a free Forex PDF PLUS:

  • 14 Video Lessons
  • Free One-on-One Training
  • A 5000$ Training Account
  • In-House Daily Analysis
Become a forex trader!

Scroll To Top
Free PDF and UNLOCK website features