- CAD, Loonie, or Canadian Dollar is the official currency of Canada.
- CAD is a commodity currency. Its valuation is driven by Crude Oil Prices.
- Canada has the second largest Oil reserves in the world, behind Saudi Arabia.
- Because of the recent rise of Crude Oil Prices, CAD has appreciated way above normal levels. It has broken Parity level with the US Dollar several times.
- Recent news out of Canada (Apr. 08) suggested that its economy might be affected by US. Since United States is the number one importer of Canadian goods.
- USD/CAD makes up about 4% of all the activities of the Forex Market.
- We trade news releases from Canada regularly. Usually release times are either 7:00am or 8:30am NY Time.
- When trading USD/CAD, you must be aware of the intraday Crude Oil prices.
- Oil is priced internationally in US Dollar. If Oil goes up, USD goes down, USD/CAD goes down. If Oil goes down, USD goes up, USD/CAD goes up.
Crude Oil 3-year Chart and USD/CAD Chart
Central Bank Governor: Mark J. Carney
Voting Members: Tiff Macklem, William Black, Philip Deck, Bonnie DuPont, Douglas Emsley, Jock Finlayson, Carol Hansell, Brian Henley, Daniel Johnson, David Laidley, Leo Ledohowski, Richard McGaw, and Michael O’Brien.
Current Interest rate: 1.00%
Central Bank Governor: Ben S. Bernanke
Voting Members: William C. Dudley, Elizabeth A. Duke, Jeffrey M. Lacker, Dennis P. Lockhart, Sandra Pianalto, Jerome H. Powell, Jerome H. Powell, Jeremy C. Stein, Daniel K. Tarullo, John C. Williams, and Janet L. Yellen.
Current Interest rate: 0.25%
Since global commodity prices are pegged to the USD, a contract to buy crude is an automatic contract to sell USD and vice versa. Most Oil exporting countries keep their foreign reserve with a different currency rather than USD because of this reason, for instance, Saudi Arabia uses the Euro.
In Forex Market, if USD is losing against Euro, one can expect that the US Dollar Index is lower, therefore ALL commodities (because they are pegged to the USD) are going to be traded higher by default.
Canadian Dollar is also affected by the amount of Oil Reserves in the U.S. If the reserves are high, then Canadian dollar will drop in value as crude prices drop. U.S. is of course the number one client for Canadian oil export.