The Commodity Research Bureau Index CRB and Forex

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Forex traders interested in evaluating further the commodity markets and their impacts on the forex markets can look to the CRB Index. The CRB index is a composite of 17 non-financial commodities and is closely watched as a clue for inflation. Therefore, its relationship to monetary policy and the value of the dollar is important. For those trading currencies that reflect commodity prices more closely such as the Australian dollar, New Zealand dollar, the South African rand and Canadian dollar, this index should be followed.

Chart below compares the CRB and the USDX. Notice how they often diverge.

Key Concept

Forex trading is inherently inter-market and scanning the key commodities (oil, gold, CRB) is helpful in pinpointing opportunities to trade, especially when these indexes are at their extremes.

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