The USD/CAD is a currency pair which stands for United States Dollar/ Canadian dollar. It is one of the different currency pairs traded on the forex market. The pair simply means the amount of Canadian dollars required to get a US Dollar. It also means that the Canadian Dollar is regarded as the counter currency while the US Dollar is the base currency and this is the same pattern for any other currency pair.
It is important to note that many forex and economic experts refer the USD/CAD pair as a “Loonie” and this is as a result of the loon found at the rear of the Canadian dollar. Because raw material is what mostly makes up the export base of the Canadian economy, the CAD is normally regarded as a commodity currency.
General Facts and Information
The seventh most traded currency pair in the world is the USD/CAD. There are 3 commodity currencies traded in the world of which the CAD is one of them because natural resources remains the most exported item from Canada. However, note that the Canadian economy depends on the Gross domestic product per capital.
The country Canada is one that is very rich in natural resources which include natural gas, oil and timber. As a result, the strength of the Canadian Dollar will likely be affected by abiotic factors like soil and weather.
Another thing to note about the USD/CAD pair is that it’s importance is also heightened based on the fact that Canada and USA are close neighbors. Due to the close proximity of the two countries, the trade and currency of each of them are linked together. In fact, in some cases, like economic and political factors, both currencies find themselves complimenting each other.
Factors that Affect USD/CAD Pair
There are many factors that tend to affect this currency pair of which interest rate is top of them. Apart from the interest rate, the relationship between the USD/CAD is interesting. For example, a situation where the value of the CAD is rising, the implication is that the export from the country will likely decline and this would affect the economy of Canada. Also, since oil is one of the most important exports of Canada, any change in demand for oil will likely weaken the Canadian dollar.
It is also important to note that since the United States share a very active and physical trading partnership with the US importing from Canada massively, it then means that any issue on the trading practices of one will likely affect the other. Then there is an issue of climate change and natural disasters which impact heavily on Canada export and that is why the USD/CAD pair is seen as uncertain.
However, the USD is also affected by a lot of factors. They include GDP, labor markets, FED decisions etc. In all, the USD is regarded as safe when the factors that tend to affect the US are kept under control.
In all these, the USD/CAD pair is welcomed by traders as they trade heavily on it on daily basis increasing its volatility and liquidity.
Trading on News
Currency trading news shows the direction of the market that go a long way to provide some data for traders who use it to prevent major loses. It is important to be up to date with news and events, economic indicators and other necessary information which tend to affect the forex market.
WB2016034 Publisted 23/12/16