USD/CAD - A Report Brought to You by Q8 Trade
The USD/CAD is considered to be the most popular currency pair due to the huge trading activity across the border between the US and Canada, and the currency pair enjoys a relatively high position in trading the Forex market.
This pair indicates what the Canadian dollar (pricing currency) needs to buy one USD (base currency).
The USD/CAD pair is affected by factors affecting the value of the USD or the Canadian Dollar in relation to each other or in other currencies.
The pair refers to the trading of the currencies of the United States of America (US Dollar) and Canada (Canadian Dollar).
The USD/JPY tends to have a negative correlation with the AUD pairs against the US Dollar, the British Pound against the US Dollar and the New Zealand Dollar against the US Dollar, where they are priced in US Dollars.
Historical Overview of the USD/CAD
The Canadian dollar is usually referred to as the “loonie”.
The Canadian Dollar is the official currency of Canada issued in 1871 and is one of the most traded currencies in the Forex market.
In 2012, the Canadian dollar ranked sixth among the most traded currencies in the world and is symbolized by CAD.
It has a prominent role in the economies of many countries including Britain, France, the Netherlands, and the Caribbean, and is used as a global reserve currency in many central banks around the world.
The United States and Canada have significant trade relations, the second largest trade relationship in the world after China covering all industries.
Trade differences between the two countries increased. Trade differences between the United States and Canada increased in March 2018 with the United States giving a 25 percent appreciation for Canadian-made iron imports and 10 percent for aluminum, citing the reason for the charges for reasons of national security.
Canada responded with similar fees on some US imports worth over $11 billion including steel, aluminum, orange juice, whiskey, sailing vessels, and engines.
The Canadian dollar is affected by the number of oil reserves in the United States of America. In the case of high reserve rate, therefore, the value of the Canadian dollar fell automatically because of the decline in the price of oil.
The strength of the Canadian economy witnessed a marked increase in the value of the Canadian dollar against the US greenback in September 2007, closing at a price higher than the US dollar for the first time in 30 years.
It climbed to a record high of 1.1024 against the US greenback in November of the same year which was why it was featured by The Times of Canada in 2007.
How is the value of USD/CAD determined?
The value of the Canadian dollar is quoted on the basis of the value of the US dollar. For example, if the pair trades at 1.34, it means that you need 1.34 Canadian dollars to buy $1. Of course, this value changes almost instantaneously over the five trading days.
What makes the USD/CAD pair interesting to trade?
The pair is attractive for trading because it contains the Canadian dollar, which is one of the most important and largest currencies traded, globally and is a standard currency so many central banks around the world retain the Canadian dollar as a reserve currency and also includes the US dollar, the world’s largest economy, which controls more than half of trading.
The US dollar against the Canadian dollar is one of three so-called “commodity pairs”, along with the Australian dollar against the US dollar, the New Zealand dollar against the US dollar and these pairs are closely linked to commodity changes and move according to oil prices.
Is USD/CAD trading profitable?
The US dollar against the Canadian dollar is very popular by traders to trade in the Forex market because of these important characteristics:
- The pair is characterized by the US dollar against the Canadian dollar that its path can be expected to be stable without any fluctuations.
- The greenback of the US and the Canadian dollar are reserve currencies issued by neighboring countries characterized by democracy and the appropriate relations together so there will be liquidity available in both currencies.
- The price of the Canadian dollar depends mainly on oil prices, i.e. a drop in the price of oil leads to a decline in the price of the Canadian dollar and the rise leads to the growth of the value of the dollar.
- This pair is a reserve currency issued by the central banks of the seven member countries and the reserve currency is the currency available in the reserves of foreign currencies in other countries.
- The US dollar is the usual global currency through which the standard price of all commodities is provided while the Canadian dollar has a more modest role globally.
- The US currency is characterized by an unrivaled advantage in terms of not only rising during periods of global market instability but also as the US economy booms.
- Since the pair has a good trading volume, there are more options you can count on to trade the pair including ETFs and USD/CAD futures.
- The ease of obtaining information about the factors affecting the pair, as well as charts that show price movements, news and economic data make it easy to trade in this pair and make profits especially as all the resources of this currency pair are available online.
However, before deciding which currency pair you would like to trade, we highly encourage you to learn more about what would you get from the platform that you choose to trade with and what are the advantages you will be getting from choosing a certain platform over another.
What are the factors affecting the performance of the USD/CAD?
Fed reports: Reports from the Federal Reserve Bank of Canada and the Bank of Canada are the most important impact on the currency’s trading. Four years ago, the Fed began to gradually tighten monetary policy while the Bank of Canada maintained its expansionary monetary policy. Since 2016, the US dollar has been in a strong direction against the Canadian dollar.
Political events: An alliance and common interests between the two countries, both members of the Group of Seven (G7), the North American Free Trade Agreement (NAFTA) and the North Atlantic Treaty Organization (NATO).
The economy of the two countries: The imbalance between the economies of the two countries where the value of the Canadian economy about 1.5 trillion dollars while the value of the US economy up to about 18.56 trillion dollars, which means that the basic economic developments south of the border between the two countries can only affect the dollar Canadian.
Commodity prices: Canada has a modern economy in many areas including services but it still remains an essential source of commodities from timber and minerals to oil, chemicals, wheat, and barley. Movements in commodity prices directly affect the Canadian currency. In fact, these prices are usually mentioned in US dollars and increases risks.
Exports: The US has a high demand for Canadian exports. The United States controls three-quarters of Canadian goods and Canada is the main foreign energy supplier to America including oil and gas, and due to this, it makes the proposal of US President Donald Trump to renegotiate the NAFTA a source of great concern for Canada.
How can you trade USD/CAD via CFDs?
Many traders prefer to trade the USD/CAD pair through CFDs as it increases their ability to speculate on the movement of this pair without actually owning the currency.
For example, if you decide to trade the US dollar against the Canadian dollar and expect the US dollar to appreciate higher than its Canadian counterpart, you Buy. If you think that the US greenback will fall against the Canadian dollar, you Sell. If your expectation is correct, you’ll get a profit by the price difference.
Let’s make a numerical example:
If the USD is trading at 1.3420 / 1.3430, and you have expectations that the US Dollar will rise against the Canadian Dollar, you have bought 100 of this pair’s decade CFDs at 1.3420.
After a while, the pair rose 30 pips, and the new price is 1.3450 / 1.3460. You decided to close your deal by selling the 100 key CFDs at 1.3450.
I bought with 1.3420, and I sold at 1.3450. The difference here is 30 points. Because you bought 100 CFDs in this pair, your profit is 30x100 = $3000.
The base contract value here is $10,000.
Advantages of USD/CAD trading through CFDs
- Greater profit opportunities: CFDs provide greater profit opportunities where the market situation is leveraged either by rising or falling and profit-taking through CFDs is again that does not apply to revenue stamp fees.
For example, it allows the trader to take advantage of the price to move up or down. CFDs are an agreement to exchange the price difference. This difference is caused by asking the price of the beginning and end of the contract and the difference between them is your profits. If for example, you believe that the dollar will fall against the Canadian dollar, you can set short positions on the pair and if your expectations are correct, close the deal by repurchasing the underlying asset. The price difference here is profit.
- Leverage: CFD traders can make big gains. A small amount can be deposited and trading is twice the value of this amount. It is multiplied by leverage in different ratios but it does increase the risk too much. It would be wise to master the art of managing money to keep your financial balance.
Example: You can deposit by only $100, trading at $3,000, using leverage 1:30.
- Risk management: CFD is the most important way to hedge your money from losing any negative price movements that may occur.
Example: You are currently trading in the USD/CAD pair. You bought a lot of it but the trading path of this pair is bearish. In this case, you will not lose your money since you can also speculate on a fall in price and profit even in negative price movements. This protects your investments.
How to trade the USD/CAD pair with Q8 Trade?
- Select the financial instrument:
Choose the USD/CAD pair as the instrument you want to trade on. Q8 Trade offers more than 300 financial assets that can be traded mostly through CFDs.
- Select the transaction type:
Do you have expectations of a rise in the US Dollar against the Canadian Dollar? Select Buy. But if your expectations are bearish, choose Sell. In both cases, you can make a profit as long as your market speculation is correct.
- Enter the volume:
Enter the number of units you want to trade from the USD/CAD pair.
- Manage the risk reduction tools:
You can choose between different risk management tools, including Stop Loss and Profit Orders, that are offered by Q8 Trade. These tools ensure that you close your trade at the price that you set.
- Watch your deal:
Continue your deal for a moment, watch it and when you reach what you are seeking or aiming for, you can make your decision.
- Close your deal:
If your transaction is not automatically closed due to your profit or stop-loss orders, you can close it when it’s ready.
Why should you trade the USD/CAD with Q8 Trade?
- Q8 Trade is always working to provide a safe and reliable trading environment for its traders.
- The brand provides the most up-to-date coverage of global market events and news releases in terms of currency trading providing an economic calendar with the latest events and economic events, and figures and reports that will influence the movement of this currency pair.
- The trading platform provides trading leverage in this pair that can double your head. You can deposit a small amount of money, trade in a larger amount and even multiply it by choosing the right leverage.
- It offers the opportunity to trade the pair through CFDs which makes you profit even if prices fall rather than rising.
- There are no currencies or fees on trading since you do not own the actual asset.
- Q8 Trade offers a set of tools and information to help you make informed investment decisions including live charts, technical analysis, recommendations, and daily news.