Commodities and Forex

I was wondering what commodities are tied to the euro, yen, and sterling. This way I can track them and it’ll help with part of the economic factor of trading. I hope you can help me with this, but mostly people look at economic data releases, so if you know give me a holla. And if you think it is a bad idea let me know as well, thanks. Best trading to all and stay cool eh!

Hi there, here’s some information that you could use to answer that question of yours. Here’s some currencies that might be correlated with commodities.

USD/CAD correlated with crude oil.

Most of the time, USD/CAD would be at crude oil’s mercy as Canada produces oil that’s affecting its economy at all times. Same thing goes for AUD/USD and NZD/USD’s correlation with gold(XAU/USD).

But from my study of commodities, I learnt that a nation’s economic health is not a deciding factor for a commodity, which means US or Canada or Australia or New Zealand’s economic releases doesn’t influence the price of commodity, at least not everytime.

For example, if a country’s economy falls and the supply dwindled, demand will continue to rise. There’s a classic example during the worldwide recession of the 1970s where commodity prices soared.

Supply and demand, that’s basically what’s about in commodity market. When the stock market is on fire, investors ignore companies that specialize in raw materials and other goods, and no matter how badly the economy is doing, the necessities of life such as food, heat, shelter and basic materials to re-ignite the economy such as construction, mining, agriculture will DEFINITELY sustain demand for commodities. True?

You might be asking of what if demand drops? I could possibly say that prices can still climb. How? If the supply falls faster than the currency demand, the supply-and-demand imbalances will increase and when this happen, prices increase. There’s no over-night spot that could be turned into a mining area. Finding new mines, exploiting them, and bringing the metals out to the market can take decades.

Conclusion, I don’t think any economic releases will be powerful enough to cause a huge spike, at least I’ve not seen that price reaction yet from my experience at this moment. It might give you a sight of the direction in the commodity, but how far will it sustain. I’m not sure.

Gold has its own supply and demand market, there is some positive correlation with Australian Dollar, but we shouldn’t use this as a basis for our trades. A most recent example; the AUD losing almost 200 pips in 2 days versus US Dollar and Gold sideways/higher.

That means buying interest in Gold, and obvious demand regardless of AUD environment. Once that strong demand/supply disappear, you can see Gold moving inline with USD or AUD strength/weakness, but only sometimes.

I still insist that the main factor for a currency to be bought or sold is its own supply and demand market.

So if the demand of USD is clearly increasing, and that is supposed to bring EURUSD down, does not mean we automatically sell XAU/USD and completely forget Gold own supply/demand conditions.

Thanks for the help, just figured if a chart for a commodity was closely related to one of forex, I could base by decision partially on that. I just thought I’d ask cause I heard it from someone who also trades forex. But, of course with a bit of research it seems kinda bleak in that respect, besides you never really know what will happen you can only protect yourself with forex. Much appreciated responses! Stay cool eh!

The EUR, JPY, and GBP are not what people refer to as commodity-based currencies. You generally won’t see any sustained relationships between the likes of gold and oil with those currencies.

AUD was mentioned above as a commodity-based currency, and CAD can be listed in that group too. I agree, though, that while the commodities can be a contributory factor in the market, there are other things (like rate moves) that will have more immediate impact.