diff --git a/docs/financial_docs/Forex_Trading_Strategy_Guide.md b/docs/financial_docs/Forex_Trading_Strategy_Guide.md index e9db554..56ffce2 100644 --- a/docs/financial_docs/Forex_Trading_Strategy_Guide.md +++ b/docs/financial_docs/Forex_Trading_Strategy_Guide.md @@ -54,3 +54,27 @@ ## Notes Section - **[Session-Specific Observations]:** Record insights and adjustments made during different trading sessions to refine the strategy further. + +--- + +For your Enhanced Forex Trading Strategy Guide, focusing on cross-market correlations is a key element in understanding how different markets influence each other and how this can affect trading decisions, particularly with USD pairs. Here are some well-established correlations to start with, which can be integrated into your strategy for a more informed analysis: + +### Correlation Analysis + +#### 1. **USD and Commodities (Gold and Oil)** +- **Gold (XAU/USD):** Often, gold has an inverse relationship with the US Dollar. When the USD weakens, gold prices tend to rise, and vice versa. This is because gold is priced in USD, and a weaker dollar makes gold cheaper for holders of other currencies. +- **Oil:** The USD also shares an inverse relationship with oil prices, particularly because oil transactions are globally priced in USD. Rising oil prices can indicate lower USD strength, partly due to higher inflation expectations from increased energy prices. + +#### 2. **USD and Treasury Yields** +- **10-year Treasury Yields:** There's generally a positive correlation between US Treasury yields and the USD. Higher yields often attract foreign capital to US fixed-income markets, boosting the USD's value. Monitoring the yield curve is also crucial, as it reflects economic outlook and interest rate expectations. + +#### 3. **USD Pairs and Equity Markets** +- **Risk Sentiment:** The performance of equity markets, particularly major US indices like the S&P 500, can reflect broader risk sentiment. In times of market optimism, riskier assets, including certain currencies against the USD, may perform well. Conversely, in times of uncertainty or market downturns, the USD may strengthen as a safe-haven currency. + +#### 4. **AUD/USD and Commodity Prices** +- **Commodity-Linked Currencies:** The Australian Dollar is closely tied to commodity prices, including iron ore and coal, due to Australia's significant exports. Rising commodity prices can lead to a stronger AUD against the USD, and vice versa. + +#### 5. **USD/CAD and Oil Prices** +- **Oil Dependency:** Given Canada's status as a major oil exporter, the Canadian Dollar (CAD) often moves in tandem with oil prices. An increase in oil prices can strengthen the CAD, leading to a lower USD/CAD exchange rate. + +--- \ No newline at end of file