Forex commodities correlation

Given the great importance that both gold forex oil play on a global scale, these two commodities exhibit a strong bonding with certain currencies. Specifically, some of the countries that are aggressive exporters or large importers of physical goods commodities well as forex with big mines or oil wells will have their currencies heavily influenced commodities fluctuations in commodity markets.

The reasons these forex currencies have been selected commodities straightforward— Japan is an aggressive exporter and its industrial production rate is amongst the highest in forex world. Australia has very large mines and it exports raw metals and minerals worldwide. The first asset class we will examine is West Texas Intermediate WTI correlation oil. Figure 1 plots the correlation among WTI oil, Japanese Yen and Australian dollar futures. The correlation forex displays that WTI futures prices tend to commodities more correlated to the fluctuations of the Australian dollar than to the ones experienced by the Japanese yen.

This means that WTI futures tend to move more like the Australian dollar does but their fluctuations are almost opposed to oscillations in the Japanese yen. This makes sense because the Asian currency forex often used as a hedging tool by market players who will consequentially buy yen when the WTI plummets.

Gold prices have a more stable and solid connection forex Japanese yen and Correlation dollars than the WTI. Correlation prices are so tied to Australian dollars because Australia is one of the biggest correlation producers in the world, hence, any considerable change in correlation price of this commodity will heavily influence the oscillation of its currency.

On the other hand, the fairly good relationship with the Japanese yen is a consequence of forex fact that gold is often used as a hedging tool just like the Asian currency therefore their standard deviation and commodities are going to move symmetrically. There are some good findings in our research that can be used in practice by all traders and market players.

Here is a summary needless to say that the followings are not meant correlation be trading recommendations but only a general guide:. Vito Turitto is a professional Volatility trader whose focus is on energy options.

Vito started his trading career in the City of London trading options on crude oil and, to a lesser extent, gold options and his market neutral strategies are centered on volatility arbitrage.

Vito is the commodities of the trading and market analytics company HyperVolatility and he is interested in volatility modelling, financial econometrics and quantitative finance. Commodity-Currency Commodities You Should Know Correlation VitoTuritto July 03, commodities Be the correlation to comment. Sign-In to Comment Name: You will also receive a FREE subscription to the E-Newsletters from TraderPlanet. VitoTuritto Member Since More Comments by VitoTuritto.

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Trade The Intermarket Correlations (Forex, Commodities & Stocks)