Currencies do not exist in isolation from other financial markets. They are one of four interconnected asset classes - alongside equities, bonds, and commodities - that reflect the global flow of capital. When institutional investors shift money from bonds to equities, from commodities to cash, from high-yield currencies to safe havens - these flows create predictable patterns across all four asset classes simultaneously.
What Is Intermarket Analysis?
Intermarket analysis studies the relationships between the four major financial asset classes. The framework was popularised by John Murphy's Intermarket Technical Analysis (1991) and has remained relevant because the relationships it describes are grounded in the fundamental economics of capital allocation.
The Four Asset Classes
EQUITIES: Rise when: economic growth is strong, corporate earnings grow. Fall when: recession fears increase, earnings disappoint. BONDS (Government): Rise (yields fall) when: recession fears increase, safe haven demand rises. Fall (yields rise) when: growth is strong, inflation rises. COMMODITIES: Rise when: global growth is strong, dollar weakens. Fall when: recession fears increase, dollar strengthens. CURRENCIES: Driven by: yield differentials, growth outlook, and risk appetite.
Equities and Currencies
Rising equity markets generally correspond to risk-on conditions - investor confidence is high, capital is seeking growth. This environment typically weakens safe haven currencies (JPY, CHF) and strengthens commodity currencies (AUD, NZD).
Bonds, Yields and Currencies
Bond yields are one of the most important drivers of currency direction over the medium to long term. Benchmark yield data published by institutions like the US Department of the Treasury (such as the 10-year yield) provide critical signals for dollar direction.
Commodities and Currencies
OIL - Canadian Dollar (CAD): Canada is a major oil exporter. Rising oil → CAD strengthens. GOLD - Australian Dollar (AUD): Australia is a major gold producer. Rising gold → AUD strengthens. IRON ORE - Australian Dollar (AUD): Chinese industrial demand → iron ore up → AUD up. COPPER - Global growth proxy: Rising copper signals global industrial growth - risk-on.
Intermarket analysis is not about finding a mechanical formula - it is about building a comprehensive picture of the global capital flow environment before you focus on individual currency pairs. Five minutes spent checking equities, bond yields, gold, and oil gives you a macro context that most retail traders completely lack.