Intermarket Analysis – Things I Watch

Intermarket Analysis:

The analysis of more than one related asset class or financial market to determine the strength or weakness of the financial markets or asset classes being considered. Instead of looking at financial markets or asset classes on an individual basis, this type of analysis looks at several strongly correlated markets or asset classes such as stocks, bonds and commodities.

I thought it might be of interest to some of you to get an idea of which symbols /markets / indicators / areas I monitor –  in coming up with my overall market analysis. Trust me, if you are only watching one asset class or concentrating on a particular sector or  a single market, you might as well put a blindfold on, tie an arm and a leg behind you – and head down to the beach for a swim – you are sunk.

Currencies:

I follow the following pairs religiously and could likely quote you the given price and recent price action summary without looking at the screen.

• USD/JPY, USD/CHF, USD/CAD
• AUD/USD, AUD/EUR, AUD/CHF,AUD/JPY
• NZD/USD, NZD/EUR,NZD/JPY
• EUR/USD, EUR/JPY
• GBP/USD,GBP/JPY
• CHF/JPY
• CAD/JPY

These pairs are constantly monitored on every single time frame (from the monthly all the way down to the minute to minute action) – and a trade will be initiated in any one (or all pairs) at a moments notice. These pairs are viewed on the Metatrader 4 Platform that is available 100% free from many brokers online.

Futures:

These symbols may look a touch cryptic to some as they are not as commonly seen / used. Please look them up  – and yes..use them.

• /GC –  (gold futures)
• /SI – (silver futures)
• /CL – (light sweet crude futures)
• /ES – (SP 500 futures)
• /YM – (Dow Jones Futures)
• /NKD (Nikkei Stock Exchange Futures)
• /DX (US Dollar Futures) – I beat alot of people up about watching this specifically as I trade/observe the USD against the majority of currencies on an individual basis – but yes…it’s on my screen.

I use the “Think or Swim” trading platform for all of my futures, stocks and options charting and would suggest you do the same as it too is 100% free and provides some incredible tools.

Other Symbols: 

This is getting a little long so I will break it into two posts, as I still havent explained much as to “what I look for” and how all of this comes together. Not to mention the 30 or 40 more symbols I need to list. So….watch for part 2.

 

Building the Complete Picture: Why Individual Markets Lie

The Dollar Index Trap Most Traders Fall Into

Here’s where most traders screw up royally – they watch DXY and think they understand dollar strength. Wrong. The Dollar Index is weighted 57.6% toward the Euro, which means you’re essentially watching EUR/USD in reverse half the time. When I’m tracking /DX futures alongside my individual USD pairs, I’m looking for divergences that tell the real story. If USD/JPY is screaming higher but DXY is flat, that’s your cue that Euro weakness is masking broad dollar strength. This is why I monitor USD/CHF and USD/CAD religiously – they give you the unfiltered read on dollar sentiment without the Euro noise. The Swiss Franc and Canadian Dollar don’t lie, and when all three are moving in sync against their respective currencies, you know you’ve got genuine USD momentum that’s about to steamroll everything in its path.

The key insight most miss: individual currency pairs will show you the fault lines before the index catches up. USD/CAD breaking above major resistance while DXY looks sideways? That’s oil weakness amplifying dollar strength in a way the index can’t capture because it doesn’t include the Loonie. This is intermarket analysis at work – crude oil futures (/CL) tanking while USD/CAD rockets higher tells you everything you need to know about the next move in other commodity currencies.

Commodity Currency Correlations That Actually Matter

AUD, NZD, and CAD – the holy trinity of commodity currencies, but they don’t all dance to the same drummer. The Australian Dollar lives and dies by iron ore and gold, which is why I’m constantly cross-referencing /GC futures with AUD/USD. When gold futures are making higher highs but AUD/USD is struggling, that’s Chinese demand weakness showing up in the Aussie before it hits the yellow metal. The correlation breaks down when it matters most, and that’s when you make money.

The New Zealand Dollar is the pure risk appetite play of the three. NZD/JPY is my go-to barometer for global risk sentiment because it strips away the commodity noise. When this pair is diverging from /ES futures, somebody’s lying, and it’s usually the equity market that catches up to the currency. NZD/USD breaking key support while S&P futures hold steady? Start looking for the cracks in risk assets because the Kiwi is telling you money is quietly heading for the exits.

CAD is the oil currency, plain and simple. USD/CAD inverse correlation with /CL crude futures is so reliable it’s almost boring – until it breaks. When crude is rallying but the Loonie isn’t strengthening, that’s either US dollar strength overwhelming everything or Canadian economic weakness that’s about to show up in the data. Either way, that divergence between currency and commodity is your early warning system.

Safe Haven Flows and the JPY Factor

The Japanese Yen crosses are where intermarket analysis gets really interesting. CHF/JPY, EUR/JPY, GBP/JPY – these aren’t just currency pairs, they’re risk gauges. When all the JPY crosses are selling off simultaneously while /ES and /YM futures are grinding higher, you’ve got a classic divergence that’s screaming trouble ahead for risk assets. The Yen doesn’t lie about global stress, even when equity markets are putting on a brave face.

Here’s the nuance most miss: USD/JPY behaves differently than the other Yen crosses because it’s caught between safe haven flows (favoring JPY) and interest rate differentials (favoring USD). When USD/JPY is rising but EUR/JPY and GBP/JPY are falling, that’s not risk-on sentiment – that’s dollar strength pure and simple. The distinction matters because your next trade setup depends on correctly identifying whether you’re seeing risk appetite or currency-specific flows.

The Futures Market Edge

Stock index futures (/ES, /YM, /NKD) don’t just tell you where equities are heading – they tell you where currencies should be heading. The Nikkei futures correlation with USD/JPY is textbook, but the real money is made when that correlation breaks down. When /NKD is pushing higher but USD/JPY is stalling, that’s domestic Japanese buying supporting their own market while international flows turn cautious on the currency pair.

Gold and silver futures (/GC, /SI) aren’t just precious metals – they’re dollar hedges and inflation trades wrapped into one. When both metals are rallying but the dollar isn’t weakening across the board, that’s inflation expectations rising faster than interest rate expectations. That environment kills currencies from countries with negative real rates and supercharges currencies from countries staying ahead of the inflation curve.