The Importance of Commodities in Forex

Commodities impact us every day. The changing price of such commodities as gas, lumber, gold can affect our day to day decisions. They can also make us money.

Because changing commodity prices also impact the forex market, learning how to take advantage of the positive and negative effects commodities have can help you succeed in your trading goals.

Commodities are goods that can be traded all over the world for other commodities or for money. These commodities can be traded directly in the Futures Market or indirectly in the Stock Market.

The stock market allows investors and traders to participate in commodity trading through Exchange Traded Funds (ETFs).

When the price of a commodity goes up, the affiliated ETF goes up as well.

Price changes in commodities also influence currency exchange rates. Countries that produce tradable commodities benefit when the price of that commodity goes up.

Anything that is good for the price of the commodity is usually also beneficial to the country in which it is produced, because the exchange rate of the currency in that country becomes more desirable.

Next to interest rates, commodity prices have the greatest influence on forex market rates. The two top commodities that have the highest impact on any given commodity are oil and gold.

Countries that produce one or both of these commodities in significant amounts are affected by the price changes of those commodities.

For example, if the price of oil increases, the currencies of oil-producing countries also increase in comparison to the US dollar.

Nowadays, the top two countries (and currencies) affected positively by increases in the price of oil are Canada (CAD) and Great Britain (GBP). Australia (AUD) is also affected to a lesser extent. Conversely, the Yen (JPY) is negatively correlated to oil. If oil goes up, it goes down.

Knowing this is one way that users can get an advantage in the market. By looking for automated AI-Trading or A-Signals that move in the same direction as well-correlated markets, users can expect to have the wind at their back so to speak.

For example, suppose you noticed the strong positive correlation between the Canadian Dollar (CAD) and the price of oil. Suppose further, you’ve also noticed the strong negative correlation between the price of oil and the Japanese Yen (JPY). You would be very interested in any trade that was long on CAD/JPY, because you knew that has a major trend behind it.

The chart below is an example of how a commodity correlates to forex trading. The price of oil (red line) is trending higher, and the correlation between the price of oil and the EUR/CAD pair is shown in the red histogram study below the chart.

Since the histogram shows that most of the correlation is below the zero level, it establishes the fact that the EUR/CAD is negatively correlated to the price of oil.

Commodities in Forex

Therefore, if the price of oil is trending higher it is also true that short trades on the EURCAD are likely to do well .

The best way to trade forex

There are two ways to invest with our AI in forex:

1. Automated with AI-Trading. Check out the 3 steps to trade automated with our AI.

automated trading with ai bot

Don’t you have a broker account yet? Our AI is integrated to trade automated with the broker Oanda. Click here to open an account.

With Automated AI trading you do not need MT4 / MT5 and other trading platforms to invest in forex. All forex trades are automatically placed into your broker account and you can monitor the AI trading performance directly on our dashboard.

2. Manually with AI-Signals.

Wiseinvest also provides AI forex signals that perfectly fit into MT4, MT5 and any trading platform. To trade with our AI forex signals, you must simply copy the data you receive from each real-time signal into any forex brokerage account of your choice.

There are five unique variables for each AI signal, and each must be copied exactly, in order to match the performance of the signal as close as possible.

Each AI signal alert consists of the following five data points:

  • Symbol (forex pair)
  • Direction (long or short)
  • Position size (number of units or lots)
  • Take profit (price level to exit with maximum gain)
  • Stop loss (price level to exit with maximum loss)

You can trade forex with our free forex signals clicking here, or with our Premium subscription that provides you unlimited AI signals and automated AI trading in partner brokers. Whether you are a beginner or a Professional forex trader, our AI trading system can help you save time and improve your trading performance. Get started with free AI.

When investing through Wiseinvest automated AI trading or AI forex signals, you do not need to calculate or change the leverage in your forex broker account. Learn more about leverage in forex trading clicking here.

Disclaimer: Forex and Contracts for Difference (CFDs) are complex instruments and come with a high risk of losing money due to leverage. Forex trading is not suitable for everyone. You should consider whether you understand how forex and CFDs work and whether you can afford to take the high risk of losing your money.

The forex brokerages displayed shall disclaim the overall performance of traders in their platforms. Oanda warns that 76.8% of retail forex traders lose money trading CFDs. XTB warns that 80% of retail forex traders lose money trading CFDs. The forex broker Fxcm warns that 69.66% of retail forex traders lose money trading CFDs.

The performances aforementioned are not related to Wiseinvest AI forex trading and AI forex signals system. You can check the performance of our AI forex system on our dashboard.