Summary of XAU/USD Correlations:
Strong Positive: AUD/USD
Moderate Positive: EUR/USD, NZD/USD
Strong Negative: USD/JPY, USD/CHF
Moderate Negative: USD/CAD
1. Highly Correlated Currency Pairs
These pairs often move together due to economic ties, trade relationships, or shared reserve
currencies.
EUR/USD & GBP/USD (Positive Correlation)
o Both are quoted against the USD.
o If USD strengthens, both tend to fall, and vice versa.
AUD/USD & NZD/USD (Positive Correlation)
o Both are commodity-based currencies.
o Strong economic ties between Australia and New Zealand.
USD/CHF & USD/JPY (Positive Correlation)
o Both act as safe-haven currencies.
o If risk sentiment changes, they move similarly against the USD.
EUR/USD & USD/CHF (Negative Correlation)
o When EUR/USD rises, USD/CHF tends to fall (due to the USD component).
Strong Correlations of XAU/USD, NASDAQ 100, and S&P 500
Strongly Positively Correlated
Asset Strongly Negatively Correlated 📉
📈
JPY (USD/JPY ↓), CHF S&P 500, NASDAQ 100, USD (DXY ↑),
XAU/USD (Gold)
(USD/CHF ↓) USD/JPY ↑
NASDAQ 100
S&P 500 (SPX), USD/JPY XAU/USD (Gold), JPY (USD/JPY ↓)
(NDX)
S&P 500 (SPX) NASDAQ 100, USD/JPY XAU/USD (Gold), JPY (USD/JPY ↓)
Key Takeaways:
✔ XAU/USD (Gold) moves opposite to S&P 500 & NASDAQ (risk-off asset).
✔ NASDAQ 100 & S&P 500 move together (both are risk-on assets).
✔ USD/JPY follows stock indices (risk-on correlation).
✔ Gold strengthens when stocks fall, and JPY/CHF rise in risk-off sentiment.
Got it — that’s a key addition! Here's the updated breakdown with supply/demand zones and
fake/invalid confluence filters incorporated:
✅ Updated List of Confluences & Implementation Plan
Chart Implementation
Confluence Description Extra Filters
(5M)
A higher high or lower Draw dashed line, BOS Filter out fake BOS
Break of
low breaking a key label. Confirm with volume (e.g., wick breaks
Structure (BOS)
structure level. or candle close. with no body close).
Change of First opposite structure Validate with
Draw vertical line + label
Character break, signaling trend inducement or OB
when detected.
(CHoCH) reversal. after the CHoCH.
Last bullish candle Filter out invalid OBs
Draw zone from OB candle.
Order Block (OB) before a bearish move that aren’t respected
Color-coded by direction.
(or vice versa). after CHoCH/BOS.
Temporary highs/lows Mark with dashed line or Only valid if price
Inducement near OBs meant to lure icon. Occurs just before OB moves into OB
liquidity. mitigation. afterward.
Liquidity Sweep Stop hunt above/below Highlight wick and label Confirm with reversal
(Takeout) significant swing points. “Take Out.” or OB mitigation.
Mark as invalid if
Price inefficiencies Shade gap area. Potential
Gap (Imbalance) already mitigated or
between candle bodies. retracement zone.
not near OB.
Zone where large Highlight zone (red = Align with OBs,
Supply/Demand
sell/buy orders supply, green = demand). CHoCH, or BOS for
Zone 🆕
previously occurred. Used for entries & exits. valid setup.
Confirmation of price Place Buy/Sell Limit at
reacting at zone. Entry upon mitigation Must happen post-
Entry Trigger
OB/demand/supply + bullish/bearish engulfing sweep/CHoCH.
zone. or confirmation candle.
Avoid drawing or label
Confluences that appear Add label or marker
Invalid/Weak them “Invalid.” E.g., OBs
but don’t meet proper to show invalid
Confluences 🆕 that don’t lead to BOS, fake
conditions. setups.
CHoCHs.
📌 Practical Implementation Summary
The strategy logic will activate only when a valid confluence stack appears:
o CHoCH → OB (within Supply/Demand) → Inducement/Sweep → Confirmation
We'll build functions to detect valid and invalid confluences.
Entries will occur at valid OBs inside supply/demand zones, and exits at opposing zone
or TP level.
Visuals will show:
o Colored zones (OB, Demand/Supply)
o Dashed lines (BOS, CHoCH)
o Labels (e.g., Inducement, Gap, Take Out)
o Entry and TP/SL marks
⚙️Next Steps Before Coding
If this version looks solid to you, I’ll start the Pine Script implementation with:
Entry logic based on all the stacked confluences
Optional toggles to show/hide each confluence on the chart
Strategy mode with full TP/SL and risk control
Let me know if you want to:
Add or remove any filters
Prioritize specific confluences over others
Use custom color schemes
Once I get the green light, I’ll jump into the code!
