forex4love Posted February 15, 2010 Report Share Posted February 15, 2010 Almost all Forex traders know that Gold and US Dollar markets move against each others. It means when gold price goes down, USD goes up and visa versa. Therefore USD and gold are highly correlated and their correlation is even stronger and more reliable than the correlation that different currency pairs have. Now the question is if this strong correlation can be used in trading either gold or USD or both. The answer is yes. Gold and USD prices move against each other. When gold forms a buy signal, USD forms a sell signal, but the good thing is that sometimes the signals that one of them forms is ahead of the other one and so it can be used as a leading indicator to trade the other one. How to Trade Gold and USD Using the Gold-USD Correlation? First, you have to open both gold and a USD cross currency pair (like USD-CHF) price charts on your trading platform at the same time. Both of the price charts have to be set to the same time frame, for example one hour. Then you have to analyze both of the price charts, based on the trading system that you have. For example I use support/resistance breakout. So all I have to do is finding a support/resistance line on one of the gold or USD-CHF price charts and waiting for the breakouts. Sometimes you can find a resistance line on gold, but you can not see any visible support line on USD-CHF. However, the resistance breakout on gold will be followed by a sell signal on USD-CHF and so when gold goes up, USD-CHF goes down. The resistance breakout on gold can be used as the confirmation of the sell signal on USD-CHF and visa versa. So you can trade any of them that you like, while you have a confirmation from the other one. Quote Link to comment Share on other sites More sharing options...
jmwaraujo Posted February 15, 2010 Report Share Posted February 15, 2010 Re: How to Trade Gold and USD? Gold and USD Correlation Hi forex4love, For how long have you been trading Gold and USD Correlation? In your opinion, how well this strategy works for you? Is it possible to post some of your trading examples? Please let me know. Many thanks in advance. Quote Link to comment Share on other sites More sharing options...
forex4love Posted February 15, 2010 Author Report Share Posted February 15, 2010 Re: How to Trade Gold and USD? Gold and USD Correlation Trading Example: The below chart shows the USD and gold price at the same time. As you see there are many cases that a support/resistance level breakout in gold is followed by a resistance/support level breakout on USD and visa versa. There are also many cases that they form an opposite signal almost at the same time, but even in those cases their signals can be used as confirmation to trade either gold or USD. Quote Link to comment Share on other sites More sharing options...
TEAMTRADER Posted February 19, 2010 Report Share Posted February 19, 2010 Re: How to Trade Gold and USD? Gold and USD Correlation Trading Example: The below chart shows the USD and gold price at the same time. As you see there are many cases that a support/resistance level breakout in gold is followed by a resistance/support level breakout on USD and visa versa. There are also many cases that they form an opposite signal almost at the same time, but even in those cases their signals can be used as confirmation to trade either gold or USD.That is an interesting chart. I can help to 'fine tune' the strategy Link it in to a high value oscillator to confirm the exact entry. If you start with CCI-55 as the base it will help. I've been unable to show you a chart screengrab as my attempts have been identified as 'too big' so I must be missing something! TEAMTRADER Trade what you see and not what you hear or Hope. Quote Link to comment Share on other sites More sharing options...
vicky_ag Posted March 6, 2010 Report Share Posted March 6, 2010 Re: How to Trade Gold and USD? Gold and USD Correlation Well, my two bits on this. There is a correlation to AUD and CAD too. These two are mineral based economies which bounce up with gold going up. Quote Link to comment Share on other sites More sharing options...
F1Maniac Posted March 16, 2010 Report Share Posted March 16, 2010 Re: How to Trade Gold and USD? Gold and USD Correlation certainly looks very interesting, if we can combine this with dashboard indicators which shows strengths of oil & gold, we make something that might be well worth investing out time into Quote Link to comment Share on other sites More sharing options...
forex4love Posted March 18, 2010 Author Report Share Posted March 18, 2010 Re: How to Trade Gold and USD? Gold and USD Correlation Oil N' Gold Focus Reports Gold Rises as Lower Bond Yields Reduce Opportunity Costs Precious metals remain firm in European session as USD weakens and interest rates should stay low in advanced economies for some more time. Benchmark contracts for gold and silver rise for the third consecutive day, the longest winning streak in a month, to 1133 and 17.55, respectively. The Fed's statement sent the market a signal that interest rates will stay low in the medium-term. The 10-year Treasury yield fell to 3.64%, the lowest level in a week. Lower bond yield benefits gold and it reduces the opportunity cost to invest in the yellow metal. In Japan, the BOJ voted unanimously to keep the unsecured overnight rate at near 0.1% and decided at the split 5:2-vote to double the size of the funding operations, launched last December, to 20 trillion yen. While market reaction was not too vigorous, the reinforced low-rate environment supports gold. Crude oil advances to 82.5 with OPEC's decision to keep production quotas unchanged priced in. Oil ministers seemed to be satisfied with current price level. Ali al-Naimi, Saudi Arabia's oil minister, said that the market is having 'good demand, reliable supply and beautiful prices'. Other member countries including Iran and Venezuela also believed there's no need to adjust output. The dollar's weakness is broadly based except against the yen. What's eye-catching today is the GDPUSD which rallies to 1.538, the highest level in a month, after stunning employment data. Claimant count surprisingly dropped -32.3K in February, translating into a lower rate of 4.9%. The market had anticipated the Claimant rate to stay flat at 5%. The 3-month average ILO unemployment rate was flat in January, compared with forecast of a rise to 7.9%. Gold Daily Technical Outlook Gold's break of 1119.5 resistance suggests that correction from 1145.8 is already completed at 1097.3. Intraday bias is flipped back to the upside for 1145.8 first. Break will target 1163 resistance next. Also, note that break of 1163 will confirm that correction from 1227.5 has completed with three waves down to 1145 already and retest of 1227.5 should then be seen. However, note that break of 1097.3 will dampen the bullish case and turn focus back to 1044.5 low instead. In the bigger picture, price actions from 1227.5 are treated as correction to rise from 931.3 only and might have completed at 1044.5 already after being supported by 61.8% retracement of 931.3 to 1227.5 at 1044.4. Strong break of 1163 resistance will further affirm this case. On rally resumption, next medium term target will be 100% projection of 931.3 to 1227.5 from 1044.5 at 1340.7. On the downside, break of 1097.3 support will in turn argue that correction from 1227.5 would extend further before completion. Quote Link to comment Share on other sites More sharing options...
dar17 Posted December 3, 2011 Report Share Posted December 3, 2011 Hello senior/silver members, very useful information provided . please keep updating this thread, Thank you Quote Link to comment Share on other sites More sharing options...
Kristianto Posted December 5, 2011 Report Share Posted December 5, 2011 very interesting post. however, my circle of traders friend have started to notice that in the last 6mths, the corelation between gold and USd is not so inverse anymore. in fact their corelation is becoming more direct. anyone comment on this? Quote Link to comment Share on other sites More sharing options...
srini Posted December 5, 2011 Report Share Posted December 5, 2011 this strategy even more effective if you apply FXI-Correlate Indicator and trade only when there is an inverse correlation(divergence) between the two(i.e., trade the divergence when fxi correlate value is above 80% else ignore them to filter out bad trades or ignore when there are out of inverse correlation. Quote Link to comment Share on other sites More sharing options...
Diesel 10 Posted December 6, 2011 Report Share Posted December 6, 2011 this strategy even more effective if you apply FXI-Correlate Indicator and trade only when there is an inverse correlation(divergence) between the two(i.e., trade the divergence when fxi correlate value is above 80% else ignore them to filter out bad trades or ignore when there are out of inverse correlation. Can you please post a link to download the FXI-Correlate indicator that you mentioned? Thanks. Quote Link to comment Share on other sites More sharing options...
srini Posted December 6, 2011 Report Share Posted December 6, 2011 this indicator is already been shared in the forum as a part of correlation code secrets http://www.correlationcode.com/membercontent/videos/ you can find the fxi-correlate indicator here.... one more observation since aud/cad is directly correlated to gold whenever fx-correlate indicator is above 90% or 0.9 one can go long/short ..accordingly Quote Link to comment Share on other sites More sharing options...
srini Posted December 6, 2011 Report Share Posted December 6, 2011 similarly since the following pairs are inversely correlated one can go long/short when the indicator is above 0.9 or above 90% it is more effective and stable on higher timeframes like h4,daily and weekly one can hold positions even these pairs may go out of correlation for a while.... eur/usd with usd/chf eur/aud with aud/chf eur/gbp with gbp/chf Quote Link to comment Share on other sites More sharing options...
melindatrader Posted February 7, 2012 Report Share Posted February 7, 2012 Very nice stuff, I also understand that the USD move oposite to equities market quite a bit Quote Link to comment Share on other sites More sharing options...
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