Forex Learning : Have you ever noticed that there is a kind of relationship between trading instruments on the market? In many cases, you might notice that when the stock price rises the bond price will fall. Many traders will monitor correlations like this and try to take advantage of the opportunity.
This time, let’s try to see the relationship between the Australian dollar and gold price movements. Why? Because the fact is that Australia is a major producer of gold. You can use the relationship to try to optimize profit opportunities in gold transactions.
The relationship between Gold and Australian dollars comes from production capacity. As a result, it is only natural that the Aussie currency follows a pattern similar to the movement of gold.
The ups and downs of production and currency exchange rates will follow supply and demand on currency exchanges between miners and producers.
Take advantage of relationships
It is true that in general macro strategies cannot always work at all levels of investment. But if you use a longer time frame , you will be able to see a strong correlation.
Technically, you can search for signals through graphs to find the appropriate correlation in price movements. Graph of the movement of gold or Aussie will give a solid formation if you can see the correlation of the two price charts.
Well, now you can see that there is an opportunity to open long positions in the Aussie or gold movement when experiencing a bullish movement.
It was clearly seen that the Aussie and gold were moving in the same direction. Technically, the gold price moves closer to the $ 1300 figure, which is related to the AUDUSD movement in the range of 0.8940.
Now let’s look at trading setup using Australian dollars and gold. First, see broad macro movements.
Looking at the picture above, we see the gold price has managed to break the trend line. After this step, market participants see that the price of gold has been a trigger for the AUDUSD movement. This is supported by the possibility that stock investors choose to move their money to instruments that are considered safe-haven when the global benchmark index continues to decline in value.
You can see the same position in the movement of the Australian dollar following the movement of bullish acceleration that breaks the trend line and finally brings the price moving up (read the trendline to learn more).
You open a BUY position at AUDUSD in the range of 0.9290 with a target at the level of 0.9390. You can place the target at 0.7103 by giving a 1: 1 risk-to-reward ratio. This transaction usually takes no more than one week when the target starts to be installed.