Currencies don't trade in isolation—they respond to a global ecosystem of capital flows. Gold, oil, bond yields, and equities broadcast institutional positioning BEFORE it fully shows up in FX. Reading these relationships transforms you from a chart trader into a market strategist. Intermarket analysis = your early-warning radar.
Welcome to This Lesson
You've mastered news trading and central bank policy. But there's a critical missing piece:
The Blind Spot: Most traders analyze EUR/USD in isolation—just the chart, maybe the calendar. Professional traders analyze EUR/USD in CONTEXT—What are bond yields doing? Is gold rising or falling? Are stocks in risk-on or risk-off mode? Context reveals WHY a move is happening and WHETHER it will sustain.
Lesson Chapters
1Chapter 1: Intermarket Analysis Introduction⏱️ ~3 min
Intermarket analysis studies how different asset classes (currencies, commodities, bonds, equities) influence each other through global capital flows.
The Four Major Asset Classes
Currencies (Forex): $7.5 trillion daily volume. Driver: Interest rates, growth, risk sentiment.
Commodities (Gold, Oil): $1.5 trillion daily volume. Driver: Supply/demand, inflation, currency valuations.
Bonds (Fixed Income): $130+ trillion market value. Driver: Interest rates, inflation expectations. The "smart money" market—often leads currencies
Equities (Stocks): $100+ trillion market cap. Driver: Corporate earnings, growth expectations, risk appetite. The "risk appetite" barometer
Why Intermarket Analysis Matters
Advantage #1: Early Warning Signals — Bond Market is 17× LARGER than Forex. Institutional money moves through bonds FIRST, then filters into currencies.
Advantage #2: Confirmation & Confluence — Technical setup alone: 60% win rate. Technical + Intermarket confirmation: 72% win rate. +12% from context
Advantage #3: Avoiding Doomed Trades — Perfect technical on EUR/USD but US10Y spiking, Gold collapsing, DXY breaking resistance? CONFLICT. Intermarket veto. SKIP the trade.
2Chapter 2: Gold vs USD & Oil vs CAD⏱️ ~4 min
Gold vs. USD: The Classic Relationship
The Inverse Correlation: Correlation: -0.85 to -0.95 (strong inverse)
Why They're Inverse:
Pricing Mechanics: Gold is priced IN US dollars. When USD strengthens → Takes FEWER dollars to buy gold → XAU/USD price FALLS
Real Interest Rates: Gold pays NO yield. USD assets PAY yield. When US real rates HIGH → Sell gold → buy USD bonds. Gold FALLS, USD RISES.
Trading Application: Before trading USD pairs, check Gold. Gold ↓ + DXY ↑ = USD strength REAL → trade it. Gold ↑ + DXY ↑ = Crisis mode OR divergence → Proceed with caution.
Oil & CAD: The Direct Correlation
Why CAD = Petrocurrency: Oil & gas exports = 22% of Canada's total exports ($122 billion annually). Oil price +$10/barrel → Canada GDP +0.3%
The Mechanism:
Oil Price RISES ($70 → $85):
- Canadian export revenue RISES
- Oil companies convert USD → CAD (CAD demand increases)
- Trade balance improves
- Bank of Canada may hike rates
- Result: Oil ↑ → CAD ↑ → USD/CAD ↓
Historical Correlation: Oil vs. USD/CAD: -0.75 to -0.85 (75-85% inverse correlation). CAD follows oil closely.
Trading Application:
Confirmation: Short USD/CAD (bullish CAD). Check: Oil breaking out ($78 → $83). GREEN LIGHT with high conviction.
Divergence Warning: Short USD/CAD (bullish CAD). Check: Oil collapsing ($82 → $74). RED FLAG—skip or reverse.
3Chapter 3: Bonds vs USD & Stocks vs JPY⏱️ ~4 min
Bonds (Yields) and the USD
The bond market is where the "smart money" lives. US Treasury yields are THE most powerful leading indicator for the US Dollar.
The Direct Correlation: Correlation: +0.70 to +0.85. Yields predict USD direction.
The Capital Flow Mechanism:
US 10-Year Treasury Yield RISES (4.0% → 4.5%):
- Higher Return Attracts Global Capital (Need to buy USD to buy US bonds)
- Carry Trade Amplifies (Borrow JPY at 0.5%, Buy USD bonds at 4.5%, Net carry: 4.0%)
- Result: Yields ↑ → USD ↑
Why Bonds LEAD Forex: Bond market ($130 trillion) is 17× larger than daily FX volume. Institutional-dominated. Bond traders are professional, react FAST. Economic data release → Bond market reprices (FAST, within seconds) → Forex market follows (slower, minutes to hours). Bonds react first.
Trading Application: Monday: US10Y breaks 4.50% (major level). EUR/USD still at 1.0895 (hasn't moved yet). Bond market is ahead. Action: "US10Y breakout → USD strength coming. Prepare to short EUR/USD." Tuesday: EUR/USD falls to 1.0750 (-145 pips). Bond market gave 24-hour early warning.
Stocks and Risk Appetite (JPY, CHF)
Stock markets are the global "risk-on/risk-off" barometer. Safe-haven currencies react inversely to equity performance.
JPY: The Ultimate Safe Haven
Why JPY is Special: Japan = world's largest net creditor, Low/zero interest rates (funding currency), Stable economy
During crises: Carry trades unwind (investors REPAY JPY loans), Repatriation flows, Flight to safety. Massive JPY bid
The Carry Trade Unwind:
Normal times (Risk-On): Borrow JPY at 0.1%, Buy high-yielding assets. Requires selling JPY
Crisis times (Risk-Off): CLOSE carry trades (panic), BUY BACK JPY to repay. Massive JPY buying
Result: S&P 500 ↓ -3% → USD/JPY ↓ -200 pips (same day). Violent, reliable reaction.
Historical Correlation: S&P 500 vs. USD/JPY: +0.75 to +0.85. Stocks up = JPY down.
Trading Application:
Risk-On: S&P 500 breaking resistance (+3.3%), VIX falling (12). Analysis: Stocks rallying = risk-on = JPY weakness. USD/JPY long = WITH risk flow. GREEN LIGHT
Risk-Off: S&P 500 breaking support (-3.3%), VIX spiking (25). Analysis: Stocks falling = risk-off = JPY strength. USD/JPY long = AGAINST risk flow. RED LIGHT—skip or reverse
4Chapter 4: Summary & Quiz⏱️ ~3 min
Summary
Intermarket analysis transforms you from a chart reader into a market strategist.
Key Principles (0/7)
Professional Truth: A perfect Order Block setup on EUR/USD means NOTHING if US10Y is breaking out (USD bullish), gold is collapsing (USD strength), and stocks are selling off (risk-off, USD safe-haven). Technical analysis finds the entry. Intermarket analysis tells you WHETHER to take it. Context beats patterns. Always.
Quiz
The primary relationship between the US Dollar and Gold (XAU/USD) is typically characterized as:
Which asset class serves as the most reliable LEADING INDICATOR for predicting directional movement in the US Dollar before it fully manifests in currency markets?
When global equity markets experience a sharp sell-off creating a Risk-Off environment, the Japanese Yen is expected to:
If WTI crude oil is experiencing a strong rally and breaking through major resistance levels, USD/CAD should generally be expected to:
Call to Action
🗺️ Stop trading currencies in isolation. Start reading the global ecosystem.
Call to Action
Manage a book, not a bet. Make correlation checks and risk caps part of your routine.
Deriv
- ✅Zero-spread accounts for tighter entries
- ✅Swap-free (Islamic) available
XM
- ✅Consistently low spreads on majors
- ✅Micro accounts — start with a smaller risk
- ✅Swap-free (Islamic) available
- ✅No trading commission
Remember: The perfect technical setup is just ONE piece of the puzzle. Gold falling, yields rising, and stocks steady all CONFIRM your USD long. But if they're ALL pointing opposite? That "perfect" setup is doomed. Trade with the global flow, not against it.
Read the map. Follow the money. Trade the context.
Prerequisites
Before studying this lesson, ensure you've completed:
Ready to see the whole chessboard? Intermarket analysis reveals the global context behind every currency move.
Ready to continue?
Mark this lesson as complete to track your progress.