Intermarket Analysis Strategy

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Intermarket Analysis involves analysing multiple asset classes. The objective is to determine how one asset class impacts on another.

Asset classes have been driven by one another for many years but it is particularly more significant in the present global market.

As Forex traders we should never look at currencies in isolation. Instead we should look at equities, bonds and commodities to determine their impact on specific currencies.

I am keeping a close eye on the Aussie Dollar, lets look at some analysis of it.

The Aussie has taken a battering in recent trading mainly due to weakening global sentiment and a fall in the price China has to pay for its iron ore.

The dip in iron ore prices also impacted CAD the other high risk currency. With the price of oil making recent new lows can we see further weakening of the CAD?

The chart below shows the AUD and Iron Ore Futures contract overlaid. I believe both are at a key levels and have the potential to break lower

 

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29th March 2017

The Dollar Index rose against a basket of major currencies after news that European Central Bank policymakers were wary of making any changes to their policy message in April pressured the euro.

The chart below shows Dollar Index. I do not like calling tops and bottoms but if the Dollar has indeed carved out a low can we assume the Euro will fall further?

As the Euro makes up the largest percentage of the Dollar Index, if one falls the other is likely to rise and vice versa.

You would be brave to assume the Dollar Index has formed a low right now. As corrections can be complex I like to see further evidence before considering longs.