News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
GBP/USD
Mixed
USD/JPY
Mixed
More View more
Real Time News
  • Will the Swiss Franc find reprieve after recent losses against the Canadian and New Zealand Dollars as NZD/CHF and CAD/CHF uptrends face key chart barriers? Find out from @FxWestwater here:https://t.co/c89gcaNhTt https://t.co/vkLRsG8KEn
  • The Australian Dollar may be at risk of losses against the New Zealand Dollar after an unexpectedly high NZ inflation reading sent AUD/NZD towards challenging short-term rising trend support. Get your $AUD market update from @ddubrovskyFX here:https://t.co/JoaUMTv80S https://t.co/Hl4I8Gl7Ez
  • Japanese candlesticks are a popular charting technique used by many traders, and the shooting star candle is no exception. Learn about the shooting star candlestick and how to trade it here: https://t.co/mfwJ0sZLTs https://t.co/6lPNDoWZAw
  • The gold price rebound keeps XAU/USD within the confines of the August downtrend. From a trading standpoint. Get your $XAUUSD market update from @MBForex here:https://t.co/B3Jct6mIBD https://t.co/gHAtO2jcrp
  • Gold recovered from a steep sell-off this morning to finish the day just lightly lower $XAU $USD https://t.co/lkcyL8gts9
  • Forex Update: As of 21:00, these are your best and worst performers based on the London trading schedule: 🇪🇺EUR: 0.05% 🇨🇭CHF: 0.01% 🇯🇵JPY: -0.25% 🇳🇿NZD: -0.55% 🇦🇺AUD: -0.64% 🇨🇦CAD: -0.75% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/UVTYrLMwRS
  • Commodities Update: As of 21:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: -0.54% Gold: -0.87% Silver: -1.82% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/3BoduI6beG
  • Earnings season is underway and key tech leaders are set to report next week. Get your #Dowjones market update from @PeterHanksFX here:https://t.co/vAesS48lgG https://t.co/es8tChHx3y
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 100.00%, while traders in Wall Street are at opposite extremes with 66.20%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/cFre7YkQsc
  • The heaviest concentration for potential market volatility in scheduled events next week seems to me to be Tuesday-Wednesday: https://t.co/DyDASx24zL
Trade Gold Using Currency Correlations

Trade Gold Using Currency Correlations

Walker England, Forex Trading Instructor

Talking Points:

  • Correlations are useful to find direction for a variety of markets.
  • Gold and the AUDUSD have a positive correlation.
  • Once direction is found, plan your trading strategy for another asset.

Understanding correlations is a great way for traders to form opinions on markets that they may previously not follow. The idea of a correlation is to take two seemingly different markets or assets and see how market price moves relative to each other. Today we will review using the AUDUSD currency pair to determine the direction of gold through the use of a correlation.

Let’s get started!

Golds Correlation

When someone mentions Gold, the AUDUSD should immediately come to mind as a correlating asset. These assets are positively correlated, meaning they can be seen generally moving in the same direction. First this correlation works because both assets are priced in US Dollars. The AUD/USD pair represents Aussie Dollars priced in US Dollars. While gold is XAU/USD or gold priced in US Dollars per oz. When the US dollar gains strength, both assets tend to depreciate in value

Secondly, the AUD has a high correlation to gold due to Australia’s extensive gold mining operations. As gold prices fluctuate, this increases or decreases the amount of funds transferred into AUD to make purchases of the metal. These transfers essentially change demand for the currency and can directly cause changes in the AUDUSD currency pair as well.

Learn Forex – AUD/USD & Gold (XAU/USD) Correlation

Trade_Gold_Using_Currency_Correlations_body_Picture_1.png, Trade Gold Using Currency Correlations

(Created using FXCM’s Marketscope 2.0 charts)

Trading the Correlation

The key to trading positively correlated assets, is finding a direction from one of the underlying assets before making a trading decision. If traders are seeing the AUDUSD push to lower lows, this could easily be the catalyst for a bearish bias on Gold. Conversely if gold is trending upwards, this can also be a signal of a new uptrend on the AUDUSD.

As you can see, this information is very useful to traders that have a general fundamental view of the market. If you have an opinion on Gold or the US Dollar this can be relayed into a trade idea. Often traders that are bullish on Gold choose to trade the AUDUSD instead of the metal itself. The Aussie Dollar carries a 2.50% banking rate, meaning traders can earn additional interest while executing a buy order on a positively correlated opinion of Gold. If a trader is bearish on the AUDUSD currency pair, traders can in turn sell gold to avoid accumulating interest on their trading balance.

Try trading Gold and correlations using a FREE Forex demo account. This will give you an idea of how price fluctuations affect commodities and currencies while practicing your trading in real time!

---Written by Walker England, Trading Instructor

To contact Walker, email instructor@dailyfx.com . Follow me on Twitter at @WEnglandFX.

To be added to Walker’s e-mail distribution list, send an email with the subject line “Distribution List” to instructor@dailyfx.com .

Want to learn more about Moving Averages? Take this free14minute“Moving Average”course presented by DailyFX Education. In the course, you will learnhow to filter worthwhile trends, identify support and resistance, and find which entries give you the highest probability trades.

Register HERE to start your FOREX learning now!

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES