FOREX Intermarket Effects

No market works in isolation, and this is also true for the FOREX market. Normally we focus on only one market, but significant advantages can be gained if we would use inter-related markets in our technical and fundamental analysis. Take the CHF as an example. Since Switzerland's largest trade partner is Germany (Euro-zone), then any information coming out from Germany or the Euro-zone will have an impact on the CHF valuation.

FOREX Intermarket Effects that are of interest:

Related currency pairs
Related economies
Stock Market Indices (DJIA, SP500, NASDAQ, DAX, FTSE100 etc)
Energy (oil, natural gas, uranium)
Precious metals (gold, silver, platinum, palladium)
Other commodities (aluminium, copper, steel etc)

How do we then judge which will have an impact on the currency pair we are trading. Well, you should read up on the country background of each currency you trade. Download the current CIA World Factbook. Pay close attention to the following information in the Economy section of the World Factbook:

Industries
Exports – commodities
Imports – commodities

As an example I will take Australia. First we take look at Industries where it say as follows:

mining, industrial and transportation equipment, food processing, chemicals, steel

Then scroll down to Exports – commodities. The we find such mining products as gold, alumina and iron ore. If prices of these commodities have a strong rising trend (as we have had the past years) then that should positively impact the Australian economy and thus the AUD, since they are such an important part of the Australian economy.

Also take a look at Imports – commodities. What do we find there that could impact the the AUD? Well, crude oil and petroleum products for sure, especially the way Crude oil have surged. This is of course negative for the AUD, but since many countries are net importers of oil (like USA) the impact should be negligible.

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