The markets fluctuate every minute, hour, day, weeks, etc. Making money on the markets is entirely linked to how well an investor can predict the direction of a trade. Predicting the direction seems easy, putting the trade on and waiting for it to work in your favor is where the challenge lies. One of the ways that can help predict the direction a market is moving is by looking at commodities that are highly correlated with specific currencies. The movement of these currencies can often drive the direction of the stock market as well.
Not surprisingly, the Canadian dollar is highly correlated with commodities price action, but interestingly enough, it’s correlation is more to oil prices rather than any other commodity. The price of gold, for example, does not have enough influence over the GDP of the Canadian economy as it is not a major component of Canadian production and exports. The currency with the closest correlation to the price of gold happens to be the New Zealand Dollar. So how do you use this information to trade in the markets?
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