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[Oluti]

One issue with using global equity markets to make forex trading decisions is figuring out which leads which.

It’s like answering that age old question, “Which came first, the chicken or the egg?” or “Who’s yo daddy?!”

Are the equity markets calling the shots? Or is it the forex market that wears the pants in the relationship?

The basic idea is that, when a domestic equity market rises, confidence in that specific country grows as well, leading to an inflow of funds from foreign investors. This tends to create a demand for the domestic currency, causing it to rally versus other foreign currencies.

On the flip side, when a domestic equity market performs terribly, confidence falters, causing investors to convert their invested funds back into their own local currencies.

For the past couple of years, however, this principle holds contrary for the U.S. and Japan.

Any upbeat economic figures in the U.S. and Japan more often than not weigh down on their respective currencies, the dollar and yen.

First, let’s take a look at the correlation between the Dow Jones Industrial Average and the Nikkei to see how stock markets all over the globe perform relative to each other.


Since the turn of the century, the Dow Jones Industrial Average and the Nikkei 225, the Japanese stock index, have been moving together like lovers on Valentine’s Day, falling and rising at the same time. Also notice that sometimes one index leads, rallying or dropping first before being followed by the other index. You could say that stock markets in the world generally move in the same direction.

 

[lioralace]

Forex vs. Equities: Who’s Actually Moving the Needle?

Ever been glued to your chart, coffee in hand, trying to figure out if the currency market is just hitching a ride with stocks—or if it’s the other way around? Yeah, same. It’s the old “chicken or egg” game, but with way more numbers and, let’s be honest, probably more headaches.

People love to toss around this classic theory: rising stock markets in a country? Suddenly everyone from overseas wants to buy in, but to snag those local stocks, they need the currency first. Voilà, currency goes up. Take the FTSE 100—if it’s blasting off, chances are you’ll see the pound getting a little extra shine. Flip side: stock markets sucking wind? Foreign investors cash out, swap back into their own money, and that local currency drops faster than your crypto portfolio on a bad day.

Here’s where stuff gets weird though. The U.S. dollar and the yen, they don’t always play by the rules. Sometimes, good economic vibes coming out of America or Japan actually make their currencies weaker, not stronger. Totally counterintuitive, right?

Blame it on the “safe haven” tendency. Investors pile into USD and JPY when the world’s on fire, but once the sun comes out and risk is back in style? Money bails out of those “safer” currencies and runs towards sketchier, high-yield stuff—think emerging markets, or whatever’s trending that month. Wild but true: killer jobs report drops, the Dow rips higher, and the dollar… actually tanks. Go figure.

The Dow and the Nikkei? Picture them like those TikTok twins who nail every routine in perfect sync—usually. Sometimes the Dow leads and Asia follows, sometimes global drama gets them both moving together, or just as often, a central bank sneezes and they both go haywire. Nothing is ever quite as linear as we’d like.

Honestly, if you’ve hustled your way through any business or even dipped your toes in affiliate marketing, you know how this goes. Trends ripple wide and fast. One viral move begets another—whether it’s meme stocks popping off or currencies doing the cha-cha in response to yet another Fed press conference.

So what’s the move here? Don’t get stuck peering at forex or equities like they’re totally separate animals. Stack ‘em up, piece by piece, and see the broader picture. Track all the big indices. Watch the S&P, the Dow, Nikkei—whatever’s leading the charge. Mix that with a sprinkle of technical analysis, a dash of news headlines, and, critically, don’t YOLO your risk. You’ll start catching the rhythm.

End of the day, whether you’re swinging EUR/USD or just trying to hustle some extra cash on the side, it’s all about riding the right wave. Don’t just chase the flow—understand why it’s moving in the first place. That’s where the magic happens.