To analyze the correlation between forex and commodities, compare the price trends of major currency pairs and related commodities. For example, track USD/CAD with crude oil or AUD/USD with gold. Use charts or correlation coefficients to identify if they move together (positive correlation) or in opposite directions (negative correlation). This helps in predicting forex moves based on commodity price changes.

What Is the Relationship Between Forex and Commodities?

Many currencies are closely tied to the price of key commodities. For example, the Canadian dollar (CAD) is influenced by crude oil, while the Australian dollar (AUD) often follows gold prices. These currencies are called “commodity currencies.” When the price of these commodities changes, the related forex pairs often move in the same direction.

Which Currency Pairs Are Most Affected by Commodities?

Some of the most affected pairs include USD/CAD (linked with oil), AUD/USD (linked with gold and iron ore), and NZD/USD (linked with dairy and agricultural products). For instance, when oil prices rise, the Canadian dollar often strengthens, causing USD/CAD to fall. Recognizing these relationships can help traders make better predictions.

How to Use Charts and Correlation Data?

Use platforms like TradingView, Investing.com, or MetaTrader to compare forex and commodity charts side by side. Look at historical data and trends to see if both assets move in sync. You can also use correlation tables to get a numerical value (from -1 to +1) showing how strongly connected they are. A value near +1 means strong positive correlation.

Why Do Commodities Influence Currencies?

Commodities influence currencies because some countries depend heavily on exporting natural resources. If global demand for oil or gold rises, these countries earn more revenue, boosting their currency’s value. On the other hand, a drop in commodity prices can weaken their currency. This connection gives forex traders clues about where the market may head next.

Can This Correlation Change Over Time?

Yes, forex-commodity correlation can change due to economic conditions, policy changes, or geopolitical events. For example, during a global crisis, traditional patterns may break. That’s why traders should regularly review charts and stay updated with market news to avoid relying on outdated assumptions.

How Can Traders Benefit from This Correlation?

By watching commodity prices, traders can anticipate forex moves before they happen. For example, if gold prices are rising, the Australian dollar may strengthen. This gives an edge when placing trades. Also, understanding these relationships helps in risk management and portfolio diversification.