Intermarket Analysis
Learn how relationships between currencies, bonds, equities and commodities can help you understand the broader forces driving financial markets.
What Is Intermarket Analysis?
Intermarket analysis is the study of relationships between different financial markets to understand the broader forces influencing price movements.
The central idea is simple:
Markets do not move in isolation.
A move in one asset class can provide important information about another. Changes in bond yields can influence currencies and equities, while movements in the U.S. dollar can affect commodities such as gold and crude oil.
The Four Major Markets
Equities
Equity markets provide information about economic growth expectations, corporate earnings, investor confidence and overall risk appetite.
Bonds
Bond markets provide information about interest-rate expectations, inflation, economic growth, monetary policy and demand for safety.
Commodities
Commodities provide information about economic activity, inflation and global supply and demand.
Currencies
Currencies connect the global economy and reflect expectations surrounding interest rates, growth, inflation, capital flows and risk sentiment.
Bonds, Bond Prices and Yields
The bond market is particularly important because bond yields provide information about interest-rate expectations, inflation, economic growth and monetary policy.
One of the most important relationships to understand is:
Rather than simply asking whether bonds are rising or falling, macro traders should ask why yields are moving.
- Are inflation expectations increasing?
- Is economic growth strengthening?
- Is monetary policy becoming more restrictive?
- Are investors moving toward or away from safety?
The Dollar and Commodities
One of the most widely observed relationships in financial markets is the relationship between the U.S. dollar and commodities.
Because many major commodities are priced in U.S. dollars, changes in the dollar can influence commodity prices.
This relationship is not a guaranteed rule. The underlying economic environment and supply-and-demand conditions can change how markets respond.
Bonds, Yields and Equities
Bond yields influence the cost of capital and the attractiveness of fixed-income investments relative to equities.
Rapidly rising yields can create pressure on equity valuations, particularly when the increase reflects tighter monetary policy or rising inflation expectations.
Scenario A
Strong economic growth causes yields to rise while earnings expectations remain strong. Equities may continue performing well.
Scenario B
Inflation rises, the central bank is expected to remain restrictive, and yields increase. Higher yields may put pressure on equity valuations.
The important lesson is that the reason behind a market movement matters just as much as the movement itself.
The Yield–Dollar Relationship
Interest-rate expectations are one of the most important factors influencing currency valuation.
This relationship can provide useful context when analyzing:
Risk-On and Risk-Off
Intermarket analysis can also help identify the broader market risk regime.
Risk-On
- Equities generally stronger
- Risk-sensitive currencies stronger
- Industrial commodities stronger
- Investor confidence improving
- Demand for defensive assets may decrease
Risk-Off
- Equities generally weaker
- Risk-sensitive currencies weaker
- Volatility may increase
- Demand for defensive assets may increase
- Investors prioritize liquidity and capital preservation
Using Intermarket Divergences
One of the most useful applications of intermarket analysis is identifying divergences between markets that normally have an observable relationship.
For example, if equities continue rising while yields are rising sharply and other risk indicators are deteriorating, the trader should investigate whether the equity rally is becoming less broadly supported.
Another example is gold and the U.S. dollar moving higher together. Because these assets often display an inverse relationship, such a move may indicate that the market environment has changed.
Important:
An intermarket divergence is not automatically a trading signal. It should trigger further investigation into the underlying market regime.
A Practical Intermarket Framework
When analyzing an asset, use the following process:
Identify the Asset
Start with the market you want to analyze.
Check the Dollar
Determine whether USD strength or weakness supports or contradicts your thesis.
Check Bond Yields
Monitor short- and long-term yields and determine what is driving the move.
Check Equities
Determine whether the broader market environment is risk-on or risk-off.
Check Commodities
Use commodities to assess inflation, industrial demand and broader economic conditions.
Compare the Signals
Look for confirmation, contradictions and changes in market relationships.
Example: Analyzing EUR/USD
Instead of looking only at the EUR/USD chart, compare the currencies with the broader interest-rate and risk environment.
United States
Eurozone
Global
Example Market Narrative
U.S. yields ↓
German yields ↑
DXY ↓
EUR/USD ↑
These markets are broadly supporting the same narrative: relative rate expectations may be shifting away from the United States and toward the Eurozone.
Intermarket Analysis Checklist
Key Takeaway
Intermarket analysis helps traders move beyond individual charts and understand the relationships connecting global markets. Instead of asking only whether an asset is going up or down, the trader asks what is happening across currencies, bonds, equities and commodities—and whether those markets are confirming the same macroeconomic story.
The objective is not to predict every market movement. It is to develop a clearer understanding of the environment in which a trade is taking place.