Now time to learn USD/CAD analysis. One of the major pairs that traders choose is USD/CAD, this is a popular forex trading instrument with the nickname “Loonie.”
In this article, I will write a lot about the currency pair the USD/CAD, how it correlates with gold and oil. Included as major pair and usually has low spread cost. A pair that has a characteristic calm movement allows traders to focus on USD/CAD analysis to make a profit.
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USD/CAD exchange rate explained
USD/CAD refers to US dollar currency and Canadian Dollar currency, this is included in major pairs in the forex market.
The Canadian dollar is also popularly known as the “loonie” among forex traders, the reason traders call it because there is a “loon” figure on the Canadian 1 Dollar coin.
Canada has a relatively smaller population than any other country with the same area. However, Canada’s gross domestic product ranks 10th in the world. And Canada is also the 9th largest exporting country.
The fluctuation of the USD/CAD analysis rate is also very attractive for traders to trade this pair. The exchange rate at the time of press time for 1 USD is equivalent to 1.27300.
However, looking at historical data, it seems that the CAD currency has strengthened since April 2020 and until now is still on a bearish trend.
This could be the impact of the weakening USD against other major currencies.
USD/CAD average daily range
For traders, knowing the daily range of a pair will be very useful for setup profit targets in a trading plan.
USD/CAD has a slow movement character and is not too volatile. This will make it easier to identify, the best time to enter or exit the position.
For daily range movements, the USD/CAD pair reaches an average of 46-121. By taking the daily range average data, traders can determine the target of the moving average.
Based on USD/CAD daily range data, traders can place a stop loss at a distance from the moving average daily range.
USD/CAD Spread fee
The amount of the USDCAD spread pair also depends on the broker’s policy as a forex trading service provider.
However, the range of the average spread on this pair is between 1 to 4 pips on the variable spread that value may change according to the flow of demand and supply in the spot forex market.
If you want to trade this pair, it’s a good idea to check the contract specifications of this pair on your broker’s official website, or maybe ask the support contact so that you are more comfortable trading.
Brokers with STP accounts like TenkoFX and FXOpen, for example, with variable spreads, you may find dynamic fees when opening USDCAD pair positions. Unlike brokers with fixed spreads like Instaforex, they will still be subject to a fixed spread cost. The only difference is that the fixed spread is usually a dealer broker, while the variable spread is the NDD broker.
USD/CAD and gold correlation
Maybe not so many people know that Canada is one of the largest gold exporting countries in the world.
This country is the fifth largest gold producing country by producing around 160 tonnes of gold annually and making it the fifth-largest gold producing country in the world. More than 10 major gold mines are spread across the Ontario region. It is estimated that the existing gold reserves in Canada are around 2,000 tons.
Another country that is the biggest gold producer in the first place in China with about 450 tonnes every year. The second place is Australia with 300 tonnes per year, then the third is Russia with 255 tonnes per year, and the fourth is America with 211 tonnes per year.
USDCAD VS Gold in the chart
The USD / CAD correlation with the Gold price is a negative correlation. This means that the price movement tends to move in the opposite direction. If the gold price rises, USDCAD tends to decline. And if the price of gold goes down, USDCAD tends to go up.
This condition is mostly caused by the correlation between gold and USD because the gold price standard still uses USD. So that when the gold price rises, it means that the USD is weakening. And the weakening of the USD resulted in strengthening CAD which is one of the largest gold producing countries.
When comparing with the AUDUSD pair where AUD is the Australian Dollar which is one of the second largest gold producing countries, the correlation of USDCAD and AUDUSD is a negative correlation.
This is more caused by AUD as the base currency in the AUDUSD pair and USD as the base currency in the USDCAD pair. So when the AUDUSD pair decline, the USDCAD pair tends to rise.
While the correlation between AUDUSD and gold is a positive correlation, when the gold price rises, the AUDUSD pair tends to rise as well.
Can hedge USDCAD against AUDUSD?
Hedging by taking advantage of the negative correlation between USDCAD and AUDUSD pairs can be done, by placing the same position on both pairs.
This means that if you open a buy position at USDCAD then you also open Buy on AUDUSD.
The anomaly of the price change of the two pairs will be an accumulation of profit and loss where there is a possibility that one of your positions faces negative floating and the other position faces floating profit.
USD/CAD analysis and oil correlation
Maybe you already know that Canada is one of the largest oil-producing countries in the world. The country is capable of producing and exporting more than 3 million barrels of oil per day to the United States.
This makes it the largest oil supplier to the US which means Canada is the main supplier of oil to the United States. This condition makes a large volume of oil transactions resulting in a lot of demand for Canadian dollars.
Canada’s economy is export-dependent, with about 85% of its exports going to the south, USA. So it is not surprising that if the oil price rises, the Canadian dollar will also rise.
USDCAD vs Oil correlation chart
Since 2000, the correlation between USDCAD and crude oil prices is a negative 93%. This means that the direction of movement of the two instruments tends to be in opposite directions.
When crude oil prices move down, USDCAD will usually move up and vice versa.
Why does it happen?
Canada is the main US supplier, so if US demand increases, producers will need to order more oil to meet demand. This could lead to higher oil prices, which could lead to lower USD/CAD.
If US demand falls, producers may cut production because they don’t have to stock more of their supply. Lower demand for oil will weaken demand for CAD dollars.
So theoretically when oil prices rise, USD/CAD will move down because the CAD currency strengthens. And if the oil price goes down, then USD/CAD will go up because the USD strengthens.
Can I trade with this correlation?
It is possible to try to take advantage of the correlation between oil prices and USDCAD because there is a correlation between the CAD currency and the price of oil.
Many traders monitor crude oil price movements before taking a position on USDCAD. If there is a signal that oil prices will decline, they will be prepared to look for a buy signal at USDCAD and vice versa.
How to trade USDCAD vs Crude Oil correlation?
The way of trading by taking advantage of the correlation between USDCAD and crude oil prices is usually more effective for medium to long-term transactions. And less effective for short-term transactions in the H1 timeframe down.
The first step to take is to monitor the price of oil and analyze it. You can take oil live chart sources such as on Oilprice.com, or investing, Dailyfx and others. It is just to make an analysis of what is going on in the oil price.
If the oil price tends to rise, it will return to the USDCAD chart. Perform a simple technical analysis and find the best price area to open short positions.
You may need to place a stop loss. Reading news information related to oil is also important because news may cause changes in price trends.
You need to monitor further developments in oil prices, if the price may continue to rise, you need to be patient waiting for USDCAD to enter the oversold area.
USD/CAD and EUR/USD correlation
USDCAD and EURUSD correlation emphasize more on both of them have elements of the USD currency. The only difference is that in USDCAD, the base currency is USD, while in EURUSD, the base currency is Euro.
By drawing conclusions from the strengthening or weakening of the USD currency, the correlation between the USDCAD and EURUSD pairs is a negative correlation.
This means that if the USDCAD price tends to rise, the EURUSD pair tends to decline. Conversely, if USDCAD decreases, EURUSD will likely rise.
The negative correlation is not always the same value, but the range is between -70% and -95%. Based on data obtained from Myfxbook.
How to read the correlation between pairs at a value of -95% means that the negative correlation between the two pairs is stronger than if there is a -70% correlation.
Likewise in a positive correlation where the higher the value the stronger the correlation.
Can I trade USD/CAD vs EUR/USD correlation?
You can use the correlation of the two pairs to trade with the aim of hedging or increase profits with a higher level of risk.
How to trade to hedge the way is to know the daily range average of the two pairs, which one is higher than the other. In this case, EURUSD has a higher daily average range compared to USD/CAD analysis.
So that the reference is EURUSD to get the main trend, while USD/CAD’s position is only for hedging.
The scenario is if the EURUSD pair is bullish then look for long positions in both pairs. That will cause both positions to experience floating profit and loss.
Because the main trend of EURUSD is bullish, it is likely that the total floating profit will be greater than the USD/CAD floating loss pair, so that accumulated profit is still obtained.
A bad scenario occurs if EURUSD actually moves down, USDCAD’s position is only a hedge to minimize risk.
If you open the opposite position, two scenarios can occur. First, you can experience floating profit on both pairs. Secondly, you can face floating losses on both pairs. The consequence is that if you get a profit it will be high, but if you lose it will quickly reduce equity.
USD/CAD analysis economic news
News is a way for traders to anticipate currency changes based on fundamental analysis. You can get news sources related to USDCAD from several financial news portal sources such as:
By obtaining source information on an instrument, maybe you can make a conclusion about a currency that will weaken or strengthen.
Although not all news has an impact on currencies, at least you will learn from your experience trading USD/CAD analysis pairs. Especially the news about oil which needs more portion to be a reference for a conclusion.
USD/CAD analysis forecast
Summarizing some expert analysis opinions from several daily analysis sources, such as Actionforex, FXstreet, DailyFX, and Investing, USD/CAD forecast for the long term still gives more traders bearish votes.
This forecast is concluded on January 20, 2021. From the results of the voting conducted by FXstreet, it gives results for:
- Weekly, 63% vote bearish, 37% vote sideways.
- One month, 56% vote bullish, 25% vote bearish, 20% vote sideways, the conclusion is a bullish bias.
- One quarter, 36% vote bullish, 46% vote bearish, 18% vote bearish, the conclusion is bearish bias.
USD/CAD analysis based on historical prices, since March 2019 this morning tends to face bearishness in the long term.
This means that the CAD currency tends to strengthen against the USD, which is the main reason is the weakening of the USD due to the political situation in the US which tends to be full of tension.
USD/CAD analysis for 2021 still starts with a bearish tendency in the pair.
The political situation that is still uncertain in the US may be a trigger for the weakening of the USD, even though Biden has been sworn in as president, but Trump’s role in disturbing the political and security atmosphere is still a polemic so that the USD may still face a decline.
Note, this article is compiled from several sources and does not constitute investment advice, investment risks are the responsibility of each trader investor.
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