Grains correlated with the dollar

Wheat, the market I’m following at the moment, went limit up very quickly today. There was a continuation pattern to the long side, but as my target price would have been over the limit, I declined the trade. So another no-trade day!

I noticed that corn was limit up (+20 points) also. Soybeans, with their wider limit (50 points) were up a long way but still trading.

I have often noticed that sharp moves in the dollar often correlate with grain market moves. Today the US dollar was very weak at the open, and all the grain markets surged. I may be quite wrong, but I think this is influenced by the fact that the move in the US dollar price is not reflected for overseas participants in terms of their own currencies.

In other words, the trader thinking in terms of the Euro sees a much smaller price move than the trader whose base currency is the US dollar.

I am not suggesting for one moment that you try to trade this correlation, if it does in fact exist. As day traders, it is far better to concentrate on the formation of high probability chart patterns for your setups. 

 

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