Intermarket Correlations and the FX Market

Intermarket correlations can play a major role in financial market price fluctuations. This can readily be seen in the foreign exchange (or "forex") market, especially with respect to what are termed "commodity currencies." These are currencies that have historically shown to be correlated, or closely tied, to the prices of certain commodities, especially such commodities as crude oil and gold.

>The two major commodity currencies that are available for trading in the forex market are the Canadian dollar and the Australian dollar. These two global currencies exhibit correlations with the crude oil market and the gold market, respectively, as shown on the following charts.