A Forex market transaction differs from a retail transaction. In a retail environment, the price is predetermined by the seller, and the purchaser measures his need for the item against the price asked and makes his decision to buy or not. In a market transaction, both the seller and the buyer continually adjust their price expectations to the information flowing out from the market to its participants and into the market from outside sources. A seller who thinks that the price may be higher in a few minutes may choose to withdraw an offer hoping to get a higher rate. If enough sellers withdraw their offers at a specific level the deal price will rise to the next available offer. But if traders think the price may fall then they may lower their own offers until they find a buyer, in effect driving the market price lower.
When each participant in the market reacts to this changing information, the combined reaction results in the movement in price. It appears to an observer that the 'market' traded lower only because the thousands of individual decisions that comprise the movement are not given separate life - only the mass decision, 'the price', is represented. We often say 'the market reacted badly to the news' or 'the market took profit today'. But the common use of this 'market' shorthand tends to obscure what is most important psychological point in understanding market behavior - the 'market' is a picture of the thoughts of its participants, a snapshot of our minds.
The difference between what the market participants assume will happen in the market and what reality proves produces market movement. When a particular economic statistic is released, and it's at or close to the general opinion of what the result would be, then the trading reaction is muted. The statistic is said to be 'priced into the market', which means that many prior trading decisions assumed the state of the economy portrayed by the statistic and that has become reflected in the trading rate. If the statistic proves to be different than this assumption, then most of those trading decisions will be immediately unwound, and result is price movements that reflect those changes. It is this tension between the opinion of the majority of market participants as reflected in the trading rate, and the economic, statistical or rate reality that dominates currency trading.
Rising interest rates strength that country's currency
A common way to think about interest rates is how much it's going to cost to borrow money, whether for our mortgages or how much we'll earn on our bond and money market investments. Interest rate policy is a key driver of currency prices and typically a strategy for new currency traders.
Fundamentally, if a country raises its interest rates, its currency prices will strengthen because the higher interest rates attract more foreign investors.
For example, higher rates in the Eurozone may prompt U.S. investors to sell U.S. dollars and buy bonds in Euros. Similarly, if interest rates increase in Switzerland, those investors may decide to sell their Euro-bonds and move into bonds in Swiss francs (CHF), driving Euros down and Swiss francs up.
When gold goes up, the USD goes down (and vice versa)
Historically, gold is a safe haven, a country-neutral investment and an alternative to the world's other reserve currency, the U.S. dollar. That means gold prices have an inverse relationship to the USD, offering several ways for currency traders to take advantage of that relationship.
For example, if gold breaks an important price level, you'd expect gold to move higher. With this in mind, you might sell dollars and buy Euros, for example, as a proxy for higher gold prices.
Rising gold prices help major gold producers
Australia is the world's third largest exporter of gold, and Canada is the third largest producer worldwide. These two major currencies tend to strengthen as gold prices rise. You might consider going long these currencies when gold is increasing in value, or trade your GBP or JPY for these currencies when gold is on the rise.
Oil-dependent countries weaken as oil prices rise
Just as airlines and other oil-dependent industries are hurt by rising oil prices, so are the currencies of oil-dependent countries like the U.S. or Japan, both of which are massively dependent on foreign oil.
If you believe oil prices will continue to rise, you can consider buying commodity-based economies like Australia or Canada or selling oil-dependent currencies.