USDCAD Correlation – Forex Trading Tips
The United States is an economic and military superpower. Moreover, the U.S. dollar is the most important currency in the world. Its neighbor, Canada, has one of the largest economies in the world.
So, it isn’t surprising that analysts, investors, as well as regulators closely monitor the USDCAD currency pair. The purpose of this article is to help you better understand the importance of the USDCAD currency pair.
First of all, what do you know about the USDCAD correlation? No worries; we are ready to help you.
First of all, it is desirable to remember that USDCAD is a major currency pair representing the exchange rate of the U.S. dollar, or the greenback, as many people call it, to the Canadian dollar.
Interestingly, the above-mentioned currency pair is one of the most liquid trading pairs within the forex market. The USDCAD currency pair represents the currencies of two countries with huge economies.
As a reminder, the United States and Canada are trading partners. Both countries are members of the G-7.
Canada exports natural resources. So, its currency tends to be highly correlated with certain natural resources. For example, oil. It is hard to overestimate Canada’s importance to the global economy.
The role of central banks
As you know, the U.S. Federal Reserve is one of the most famous central banks in the world. What’s important, it is responsible for controlling the supply of U.S. dollars.
What about the Canadian dollar? The Bank of Canada is the central bank of Canada.
Importantly, it takes care of monetary policies related to the local currency. We need to mention both currencies are viewed as free-floating fiat currencies.
What makes the USDCAD currency pair so interesting?
People, who aren’t familiar with the forex market might ask, “What makes the above-mentioned currency pair so interesting?
Let’s start from the beginning. As stated above, the above-mentioned currency pair is one of the most liquid forex pairs. Importantly, liquidity plays an important role. Without exaggeration, it is a vital consideration for inexperienced as well as experienced traders.
Do you know how forex traders make money? Interestingly, they make money by taking a directional bet. So, they need a good level of volatility to benefit from price movements. Interestingly, volatility is also a vital consideration when it comes to the forex market.
As you might expect, the currency pair mentioned above is a very stable currency pair to trade. Nevertheless, the above-mentioned currency pair displays decent volatility characteristics. As a result, traders have the chance to make abundant profits from its exchange rate price movement.
What you need to know about the USDCAD currency pair
Before discussing the USDCAD correlation, let’s focus on other important details.
For example, do you know what the best time to trade the USDCAD currency pair is?
As a reminder, the currency markets are open five days a week. What’s interesting is that the currency markets are open 24 hours a day. So, it is possible to trade the above-mentioned pair even at 5 a.m.
It is worth noting that there are three primary sessions for the forex market. Let’s name all of them: the New York session, the London session, and the last one is? The Tokyo session.
It is desirable to remember that the currency pair mentioned above is most active during the New York and London sessions. Notably, the pair is very active when sessions overlap.
Now, let’s get back to the USDCAD correlation. The world’s one of most well-known currency pairs is highly correlated to oil prices.
Importantly, the USDCAD currency pair is one of three important commodity pairs within the forex market. Do you know the other two?
Let’s not forget about them as well. The first one is the AUDUSD currency pair, and the second is the NZDUSD.
Historically, there has been a reversed relationship between the above-mentioned currency pair and the price of oil.
For example, when the price of black gold goes up, the above-mentioned currency pair tends to go down. So, when the price of black gold goes down, the USDCAD currency pair tends to go up.
Without exaggeration, the USDCAD currency pair is one of the most traded and liquid pairs within the currency markets. The above-mentioned currency pair represents the currencies of the two very developed countries. Furthermore, the USDCAD exchange pair is more or less stable.
It is a good idea to read more about the USDCAD correlation and the forex market in general.
Last but not least, the forex market is the biggest financial market in the world. Moreover, it is not only the biggest but the most active financial market as well. Every day, participants from around the world engage in the trillions worth of foreign exchange transactions.
Political crises, natural disasters, and other factors have the potential to influence the forex market. So, it is important to monitor the information that comes from various sources.