The USD/CAD Currency Pair Information
The USD/CAD is among the top ten most popular currency pairs in the forex market and it is part of the ‘Majors’ category. This pair tells the trader how many Canadian dollars (CAD – the Quote currency) are needed to purchase one U.S. dollar (USD – the Base currency). Sometimes it is referred to as the ‘Loonie’, due to the Canadian one dollar coin which depicts the image of a loon. The value of the USD/CAD currency pair is quoted as 1 U.S. dollar per X Canadian dollars.
The amount of U.S. dollars in circulation is controlled by America’s central bank – the Federal Reserve Bank (FED); while the Federal Open Market Committee (FOMC) oversees the nation’s open market operations and sets the interest rates eight times per year, determining the value of the US currency.
In Canada, the Bank of Canada (BOC) and its Governor are responsible for setting monetary policies, printing money and setting the Canadian banks’ interest rates eight times in a year. The difference between the interest rates set by the Fed and BOC will affect the value of the USD and CAD when compared to each other.
How to trade the USD/CAD Currency Pair
To place a trade on any currency pair you need to find a reliable online forex broker. Luckily, TradeFW is the financial partner you can trust with your trading plans! The safety of your capital is very important to us as we keep your capital in segregated accounts, we offer you Negative Balance Protection, and your private data is secured through our SSL system. More than that, TradeFW is licensed and regulated by Cyprus Securities and Exchange Commission (License No.298/16).
Find the right online forex broker, choose the suitable account type, fund it; and then you are ready to trade the USD/CAD currency pair through the following steps:
1. Check your leverage value.
2. Select the trading tool (FX/CFD).
3. Select the USD/CAD currency pair and the trading unit you want.
4. Select the ‘Stop-Loss’ Order.
5. Choose the ‘SELL’ or ‘BUY’ option to open a trading position.
6. Monitor the USD/CAD chart and exit the position when you wish.
The process of trading the USD/CAD currency pair is complicated, but there’s more behind it. The financial instruments, the platform and the professional help are also important parts and the outcome of your trade depends on them. TradeFW puts at your disposal everything you could wish for: an advanced, yet user-friendly platform (MT4), available on all devices (Desktop, iOS, Android); a large and diverse range of trading tools, as well as a comprehensive education center and a round-to-clock team of professionals to assist you.
On the other hand, the best time to trade this currency pair is during the American trading session, when the New York Exchange is open. The largest trading volume falls on this session due to the fact that time in the United States and Canada is practically the same.
Factors that drive the USD/CAD Currency Pair
The Canadian dollar is considered a ‘commodity currency’ given the large deposits of natural resources, especially oil, which is mined and exported from Canada. As a consequence, sharp changes in the oil exchange rate will affect the USD/CAD.
Macroeconomic indicators of the United States and Canada, such as the unemployment rate, the GDP, the inflation, and the interest rates, highly influence the USD/CAD currency pair. In addition, international news, as well as oil related news can also generate strong movement of the currency pair.
Trading Strategies for the USD/CAD Currency Pair
There are numerous trading strategies you can choose from, but it’s for the best to pick the one that is a better match for this particular currency pair. Here are some of the most popular strategies you can evalutate:
• Trading the News Strategy: might be very efficient for the USD/CAD currency pair, as we mentioned above how strong news can impact it. This strategy puts the news and economic events above the technical analysis1.
• Fair Value Trading Strategy: implies evaluating and analyzing each sector of the economy from the two countries to see which one performs better, and making an informed decision on how those aspects will affect the forex market and the USD/CAD currency pair.
• Non-Farm Payroll Strategy: can be used with any major currency pair which has the USD on one side. The non-farm payroll (NFP) report is a key economic indicator for the United States and it is usually released on the first Friday of every month at 8:30am EST. The strategy implies waiting for the market to react and make the initial swings and after that, the trader enter a trading position in the direction of the dominating momentum2.
Trading the USD/CAD currency pair has its ups and downs, but the results may be rewarding! With TradeFW as your broker, your trading experience will be a professional and comfortable one, with all the needed information and tools in just one place!
- Somnath Das, “USD/CAD -True Targets, Strategy, near term Fx Price Movements”, May, 1, 2019, fxstreet.com, https://www.fxstreet.com/analysis/usdcad-ichimoku-breakout-trading-strategy-201704130904
- Cory Mitchell, “Trading the Non-Farm Payroll Report”, Mar, 2018, investopedia.com, https://www.investopedia.com/articles/forex/09/non-farm-payroll-report.asp