The Canadian dollar is a national currency of Canada. It is a free convertible currency and the sixth most traded currency on the Forex market.
The Canadian currency is also known as the commodity currency. That means that it correlates with commodity prices. So, it is necessary to be aware of key commodity prices while determining the direction of the movement.
Canadian Dollar on Forex
The rate of the Canadian dollar is pegged to raw materials. The behavior of all trading instruments paired with the Canadian dollar depends on the prices of oil, gas, ferrous and non-ferrous metals and other resources. Dynamics of prices for oil products influence the most. Furthermore, the Canadian currency is also affected by the state of the US economy.
Traders sometimes call the Canadian dollar the “loonie” because of an image of the loon on the $1 coin.
Trading the USD/CAD currency pair
The USD/CAD currency pair refers to the currency majors and makes the top 10 of the most popular currency pairs in the Forex market. USD/CAD is one of the most technical and liquid currency pairs, i.e. classical figures, patterns and indicators work well on it.
The USD/CAD quote shows how many Canadian dollars are needed to buy the US dollar. Therefore, USD is the base currency, and CAD is the quoted one.
USD/CAD is active during the American trading session, the largest trading volume falls on this session. This is due to the fact that time in the United States and in Canada is practically the same.
The Canadian dollar is relatively stable. Due to the high share of exports in the country’s economy, the Canadian dollar remains liquid. The US and other countries keep their foreign exchange reserves in that currency. The Canadian dollar is traded with the US dollar, euro, yen, British pound and Swiss franc.
5% of orders opened on Forex accounts for CAD. This currency pair is influenced by the following factors:
- Macroeconomic indicators of the US and Canada (inflation, unemployment rate, GDP volume, index of business activity).
- The dynamics of oil prices. Canada takes the second place in the world for oil reserves, so oil prices are of great importance for this quote. If the oil prices rise, CAD will also grow, which means that the USD/CAD quotes will decrease.
Canada is the world’s largest oil exporter. Therefore, sharp changes in the oil exchange rate inevitably affect the USD/CAD. So, it is necessary to follow the news on the oil market.
The USD/CAD currency pair has medium volatility, the average weekly range of price changes is 150-200 points. Traders use this pair for day trading and swing trading strategies.
This currency pair is popular among traders who prefer news trading. If you are a beginner on Forex, you can read the daily analysis of the currency majors, which is published on JustForex website.