Markets are one system observed through several windows
Bonds, currencies, equities and commodities are not four markets. They are four expressions of the same capital deciding where to sit.
The value of intermarket analysis is not prediction. It is confirmation and contradiction — knowing whether the story your chart tells is supported by the rest of the system, or contradicted by it.
The core relationships
Directional tendencies, not laws:
If this rises
This usually
Because
US yields
USD up
Higher return on dollar assets
US yields
Gold down
Rising opportunity cost
Oil
CAD up
Canada exports oil
Iron ore / copper
AUD up
Australia exports metals
Equities
JPY down
Risk-on unwinds yen funding
VIX
USD up, JPY up
Both are funding and haven currencies
Every one of these has a mechanism. If you cannot state the mechanism, do not trade the correlation — because you will not know when it has stopped applying, and correlations without mechanisms are just curve fitting.
Risk-on and risk-off
The single most useful frame, because it organises everything above into two states.
Risk-on: capital wants return. Equities up, commodity currencies up (AUD, NZD, CAD), yen and franc down, credit spreads narrow.
Risk-off: capital wants safety. Equities down, dollar and yen up, gold usually up, commodity currencies down, spreads widen.
Knowing the regime tells you which trades are swimming with the current. Long AUDJPY in risk-on is the same bet expressed twice — commodity currency up, funding currency down. In risk-off it is the fastest way to lose money in FX.
The dollar is the awkward case. It rises in risk-off (reserve demand) *and* in strong-US-growth risk-on (rate differentials). So dollar strength alone tells you nothing about regime. Use equities, VIX and credit spreads to read the state, then interpret the dollar within it.
Divergence is the actual signal
Correlations confirming is unremarkable — that is the default. Correlations breaking is information.
Oil rallies 4%, CAD does not move → something Canada-specific, or the market disbelieves the oil move
Equities make a new high, VIX does not make a new low → the rally is not trusted
Yields fall, dollar rises anyway → risk-off dominating rate differentials
Each divergence asks a question. None answers one. Divergences resolve in either direction, and treating them as reversal signals is a well-worn way to lose money early.
The order of causation
Not everything moves at once. Roughly:
`` Rates → Currencies → Commodities → Equities ``
Bond markets are large, liquid and populated by participants who move first. Watching yields often gives you a head start on the FX move, as the CPI example in the yields lesson showed.
Two honest caveats: this ordering compresses to near-simultaneity around major releases, and it reverses when equities are the shock — an equity crash drives everything else.
Worked example
A trader is long AUDUSD from 0.6540. Their chart looks fine: uptrend intact, higher lows, price above the last swing low.
The intermarket check:
Copper: down 3% this week
Chinese manufacturing PMI: missed badly
US 2-year yield: up 14bp
Equities: down, VIX up
Every single input contradicts the position. Australia's terms of trade are deteriorating, its largest customer is slowing, the rate differential is moving against it, and the environment is risk-off — which sells commodity currencies first.
The AUDUSD chart is not wrong. It is lagging, and it is the only window showing a supportive picture.
What this changes: not necessarily an immediate exit. But it means no adding, a tighter stop, a nearer target, and no surprise when the higher low fails. The trade has become a low-quality one even though the setup that produced it was valid.
Compare with the same chart where copper is up, PMI beat, yields are falling and equities are firm. Same setup, same entry — a completely different trade, and one worth full size.
Making it practical
You do not need a Bloomberg terminal. Five free charts, checked once before the session:
DXY — dollar direction
US 2-year yield — policy expectations
S&P 500 — risk appetite
VIX — stress level
The commodity relevant to your pair — oil for CAD, copper for AUD, gold on its own terms
Two minutes. It will not tell you what to buy. It will regularly tell you what not to.
What to take away
One system, several windows. Confirmation and contradiction, not prediction.
Never trade a correlation you cannot explain mechanically.
Risk-on/risk-off organises the whole map. Read it from equities, VIX and spreads — not the dollar.
Divergence raises a question; it does not answer one.
Rates usually lead. Five charts, two minutes, before every session.
That completes Macro & Intermarket. Next: the technical toolkit at the level these relationships are actually traded.
