Last week Canadian currency made our palms sweat. And with good reason. Even though it is no USD and no EUR, a huge chunk of financial market falls under this currency. And don’t you think that we need to know more about it and its relations with USD and other assets?

Here are interesting trading facts about Canadian dollar!

 

1. CAD is tightly connected with oil prices and commodities’ prices overall.

2. USD has an influence on CAD; CAD has no influence of USD.

3. Commodities can predict CAD-USD movements.

4. CAD is pretty much not backed by gold.

 

1. CAD is tightly connected with oil prices and commodities’ prices overall.

CAD 1

Majority of Canadian international trading falls onto commodities. Oil, precious metals, minerals and metals overall. Canada trades energy products with United States as well as the rest of the world. What does that mean for us? Well, that price for oil can easily influence CAD performance in the equity markets.

Advanced traders have already learned the ways to use CAD as a proxy asset for oil.

If you have enough experience you are going to be able to predict CAD movements and performance against the greenback by the performance and movements in the energy segment of the market.

 

2. USD has an influence on CAD; CAD has no influence of USD.

CAD 2

Due to the huge and strong international image of the United States the statement that USD and USA are more influential should not surprise anyone. That means that the following is also not going to be a huge surprise – USD and performance of US economy can have a huge impact on the economy of Canada. But there are no reverse movements.

Canada is not nearly as strong economically and politically to have at least one third of the same influence on USD. Of course this cannot be said about the towns next to the US-Canada border where economic relations are stronger but as for the rest of us CAD is pretty powerless.

 

3. Commodities can predict CAD-USD movements.

CAD 3

Prices for such commodities as silver and gold can easily predict what CAD/USD exchange rate is going to look like not only because they are fully dependent on dollar, but also because Canada is home for a lot of mining companies. And when I say a lot, I mean it. It is said that besides several major companies, Canada is also home to hundreds of little mining businesses. And of course, it is no wonder that the country is dependent of the price for precious metals.

The revenue from the precious metals sales usually acts as a strengthening act for Canadian currency. This means the more gold and silver cost, the better CAD is going to do. And like that we can predict exchange rate movement od USD/CAD.

 

4. CAD is pretty much not backed by gold.

CAD 4

For those who prefer to hold their savings in CAD it is a very bad piece of news. CAD is not backed by gold even though the country is a major producer of precious metals. Why is that bad news? Well, that means that CAD is very prone to high inflation levels, as there is no precious metal backing the currency unlike with almost all of the other currencies in the world.  

But even like that CAD is still a pretty stable currency, wouldn’t you say so?