When the domestic economy is greatly affected by commodity price shifts, then the currency is especially vulnerable. Commodity price shifts will not affect all nations, or their currencies, in the same manner. After all, nations with moderate supplies of a commodity will not have their currency affected as greatly by price shifts as nations who have little to no supply of their own.

Understanding and measuring the relative roles of different causal channels between commodity prices and exchange rates has important implications in financial decision making, especially for market participants with short horizons. From a macroeconomic perspective, this can also be useful for interpreting exchange rate movements, financial market monitoring, and monetary policy.

Currencies of countries that rely heavily on the export of commodities are often referred to as commodity currencies. An important factor that any forex trader should consider is that the value of commodity currencies usually rise and fall in tandem with the value of the country's main commodity exports. Both the value of the commodity and the country's trade balance, with respect to the commodity, are significant factors in the valuation of commodity currencies.

When trying to distinguish the relationships between certain commodities and currencies around the world it helps to realize that situations can change and the relationships are fluid. However, there are some time-tested relationships that have been established over the years that may continue to hold true well into the 21st century. As commodities in the financial market have the same role as stock and currency, the ups and downs of commodity prices could significantly affect forex market.

Understanding correlations is a great way for traders to form opinions on markets that they may previously not follow. The idea of a correlation is to take two seemingly different markets or assets and see how market price moves relative to each other. Even though gold is no longer used as a primary form of currency in developed nations, it continues to have a strong impact on the value of those currencies.

After you open your forex trading account and log into your MT4 trading platform you will see a range of currency pairs offered to you which you can trade and earn pips from.

On trading results of the beginning of the week, oil prices have adjusted. Brent for January delivery closed trading at about $ 72.8 per barrel. WTI crude oil rose up to $ 69.2 per barrel. Short-term growth has been driven by two factors.

The Chinese economy has been slowing down for an extended period of time and nobody argues about the impact it has on the global economy. China is now the world’s largest economy and if the world’s biggest exporter and consumer of raw materials slows down the rest of the world will feel a negative impact.

Correlations between the world's most heavily traded commodities and currency pairs are common. For example, the Canadian dollar (CAD) is correlated to oil prices due to exporting, while Japan is susceptible to oil prices because it imports most of its oil.