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Australian Dollar Tracks S&P 500, Canadian Dollar Silver Prices

Australian Dollar Tracks S&P 500, Canadian Dollar Silver Prices

2011-12-06 18:00:00
David Rodriguez, Head of Product
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The Australian Dollar remains an attractive high-yielding alternative to trading the S&P 500, while Silver shows itself quite correlated to moves in the Canadian Dollar.

The short-term correlation between the Australian Dollar and S&P trades quite close to 1.00—the perfect correlation. In fact, much of the DailyFX research team continues to trade the AUDUSD as a direct proxy to the S&P and Dow Jones Industrial Average. The Australian Dollar has traditionally been associated with moves in gold prices and broader commodities, but that numerical link remains stronger through the Canadian Dollar.

If looking for exposure to other markets, the Canadian Dollar offers a proxy to Silver prices and other correlated asset classes.

Forex Correlations Summary

View forex correlations to Gold, Oil, Dow Jones Industrial Average, UK FTSE 100 Index, and Silver prices.

Gold

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

0.71

0.41

0.12

0.76

-0.74

0.82

-0.57

1 Month

0.44

0.54

-0.18

0.67

-0.67

0.70

-0.56

3 Month

0.15

0.22

-0.10

0.37

-0.34

0.39

-0.32

1 Year

0.08

0.16

-0.16

0.23

-0.15

0.21

-0.22

Oil

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

0.11

0.34

0.35

0.43

-0.19

0.43

-0.36

1 Month

0.28

0.23

-0.10

0.39

-0.47

0.38

-0.37

3 Month

0.45

0.37

-0.04

0.62

-0.57

0.55

-0.56

1 Year

0.35

0.25

-0.03

0.47

-0.44

0.33

-0.41

Dow

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

0.91

0.67

-0.41

0.95

-0.89

0.96

-0.85

1 Month

0.82

0.81

-0.41

0.96

-0.92

0.91

-0.90

3 Month

0.84

0.74

-0.24

0.90

-0.88

0.88

-0.88

1 Year

0.61

0.50

-0.04

0.77

-0.80

0.71

-0.67

FTSE100

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

0.72

0.44

-0.05

0.87

-0.73

0.88

-0.68

1 Month

0.57

0.63

-0.13

0.87

-0.78

0.87

-0.73

3 Month

0.58

0.53

-0.15

0.78

-0.69

0.72

-0.72

1 Year

0.42

0.33

0.01

0.66

-0.64

0.58

-0.53

Silver

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

0.84

0.49

0.02

0.82

-0.86

0.88

-0.64

1 Month

0.57

0.50

-0.26

0.66

-0.69

0.64

-0.60

3 Month

0.36

0.26

-0.14

0.51

-0.49

0.52

-0.46

1 Year

0.25

0.25

-0.09

0.39

-0.32

0.35

-0.35

canadian_dollar_australian_dollar_forex_correlations_body_Picture_1.png, Australian Dollar Tracks S&P 500, Canadian Dollar Silver Prices

US S&P 500 versus Australian Dollar/US Dollar Forex Pair

The Australian Dollar remains extremely correlated to US S&P 500 and broader global stock markets, offering an attractive proxy to trading stocks via currencies. In fact, several members of the DailyFX Team (including this author) continue to trade the AUDUSD as a direct alternative to equities.

The Australian Dollar/US Dollar pair’s 20-day correlation to the S&P has almost literally never been stronger. At its root, the correlation stems from shifts in market sentiment. As the highest-yielding currency in the G10, the Australian Dollar has been a speculator’s currency of choice for some time now.

We will continue trading the AUDUSD as a direct proxy to stocks, as there is relatively little reason they would suddenly diverge given their significant correlation.

canadian_dollar_australian_dollar_forex_correlations_body_Picture_2.png, Australian Dollar Tracks S&P 500, Canadian Dollar Silver Prices

Canadian Dollar/US Dollar Forex pair versus Silver Prices

The Canadian Dollar remains highly correlated to oil prices and broader commodity prices, seen clearly through its strong short-term link to moves in silver markets. The 20-day correlation between the USDCAD and spot Silver prices is trading at its strongest levels since late 2010. It is perhaps surprising to note that the USDCAD has proven itself more sensitive to moves in silver markets than to its more traditional correlation—crude oil prices.

Yet silver prices themselves remain tightly linked to crude oil price swings, and we see the Canadian Dollar as a good proxy for broader commodity markets.

The Canadian Dollar should continue higher (USDCAD lower) if silver prices and crude oil prices trade to fresh highs.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

To contact David, e-mail drodriguez@dailyfx.com

To be added to David’s e-mail distribution list for this and other reports, e-mail subject line “Distribution List” to drodriguez@dailyfx.com

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

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