Forex Trading Using Intermarket Analysis

loCal ValUes, inTernaTional imPaCT
Every country has its own currency to facilitate its business and trade. 
The value of one currency as compared to another depends on the eco-
nomic health of the nations involved as well as the perception of stabil-
ity and confidence in the political climate in those countries. As con-
ditions change, currency values fluctuate to reflect the new situation.
These fluctuations create challenges for corporate financial officers and 
institutional fund managers but also provide opportunities for traders 
who want to speculate on impending changes in currency values.
Changes in currency valuations have a significant impact on govern-
ments, corporations, and financial institutions. Currency fluctuations, 
particularly when they are abrupt, affect the performance of bottom 
lines and the prices for many commodities and other markets. The 
forex market probably has a more pervasive influence on worldwide 
economic conditions than any other market, including crude oil. 
By their very nature, currencies entail strong intermarket relation-
ships. It is obvious that a currency cannot trade in isolation and that 

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ForeX trading using interMarket anaLysis
the mass psychology that drives changes in the value of one currency 
is bound to have an influence on what happens to other currencies as 
well as other related markets. Because government policies and eco-
nomic developments that affect currency values tend to evolve over 
time, currencies are good trending markets.
The key to successful forex trading is understanding how these cur-
rency markets relate to each other and how patterns of past price 
action can be expected to occur in the future as markets respond to 
ongoing financial, political, and economic forces. However, these pat-
terns and trends are elusive and may not be obvious from the examina-
tion of price charts. Nevertheless, traders need to spot these patterns 
and trends early, to get into what are potentially highly profitable 
trades and to avoid others.
Clearly, intermarket analysis tools that can help traders spot these 
recurring patterns and trends in their early stages can give traders 
a broad perspective and a competitive edge in today’s fast-paced 
forex trading arena. It was this realization more than twenty years ago 
that led to my focus on intermarket analysis and the development of 
intermarket-based market forecasting tools that could discern likely 
short-term trend changes based on the pattern recognition capabilities 
of neural networks when applied properly to intermarket data. The 
forex market, by its very nature, is an ideal trading vehicle for the 
intermarket analysis and trend-forecasting approaches explained in 
this book.