In general, most Forex traders use technical analysis more often. Traders take advantage of indicators that are usually included in popular trading apps. For some traders who stick to fundamental analysis, news in the mass media seems to be mandatory consumption every day. However, there is a more limited way of analysis, namely by looking at stock market sentiment.
Actually, the method of analysis by comparing the stock exchange and the official forex is not new. Comparing two different markets to create an analysis is also referred to as the concept of intermarket analysis. Here we will discuss a simple example of how to compare currency value movements with the stock market.
Let’s take the example of assessing the movement in the value of the US dollar (USD) and australian dollar (AUD) when compared to the S&P 500 stock index. Generally, when the S&P 500 chart nosedives, then the USD eye will actually strengthen. After all, the S&P 500 index consists of hundreds of large companies in the country, which if the stock falls means that economic conditions in America are also not good. At such times, traders are increasingly interested in pouring funds into the stock market and other high-interest assets.
When the business climate is good enough, traders will certainly be more interested in buying high-risk assets. It should be noted that like stocks, forex also includes high-risk currencies. While the USD which is a safe haven and low interest is shunned. In addition to the USD, the Japanese Yen and Swiss Franc are also safe havens.
Meanwhile, we know that the Australian currency includes major money with large interest rates. While the interest rate of the United States dollar tends to be low and it is uncertain when it will be raised. Automatically, this results in carry trade, which is a way of trading that sells low-interest currencies while buying high-interest currencies.
From this it can be concluded that as long as the United States is still trying to restore its economy and as long as the Australian dollar interest rate is still high, then the correlation between the S&P 500 index and the AUD and USD currencies will remain. Under that condition, if the S&P500 starts to fall, it means that risk interest decreases, investors try to avoid carry trades, and currencies such as AUD and USD will likely also go on sale.
In fact, there are many other instruments that can also be taken to take advantage of intermarket analysis. It’s not just about the stock market and forex. You can also use a comparison between the debt market and forex. The debenture market is also known to have an extraordinary capitalization that can be large and very liquid. So that the possibility of intervention and manipulation will be minimized.
In the end, there are many alternative analytical models that can be utilized. It’s not just technical and fundamental factors. This method can be an option for forex traders in predicting currency exchange rate movements, when trading in Indonesian online forex companies.