How To Trade USDCAD

The Canadian dollar is also called “loonie” and therefore the usdcad is being referred to as the loonie pair as well.

Trading a Currency Pair – USDCAD

This is a currency pair a bit special as the Canadian economy is a special one in the sense that it is highly dependent on what is happening on the commodity markets, namely on the oil market. Canada is a big producer and player on the oil market so price fluctuations there are influencing the way the usdcad is moving as well.

Representing two countries that share a border, the usdcad is being viewed as a currency pair that reflects the differences between the US and Canadian economies. However, oil should be filled into the equation as, again, it makes the pair moving.

What to consider when trading binary options using the usdcad pair as instrument:
– oil inventories. Look on the economic calendar for when the oil inventories are released as higher inventories mean oil prices turning lower and therefore CAD should turn lower. As a consequence, the usdcad pair should move to the upside and call options should be traded. The opposite is true for put options.
– OPEC meetings. The Vienna meetings are always moving the oil market and implicitly the usdcad pair.
– central banks interest rate decisions. Federal Reserve in the United States meets every six weeks while Bank of Canada on a monthly basis. Press conferences follow Bank of Canada interest rate decisions.

Important Economic Releases to Watch in Canada

As mentioned above, everything related to the oil industry, like US rigs count, levels of inventories, OPEC meetings, OPEC production levels, etc, are information every USDCAD trader should know when are going to be released as the pair will move sharply on this release.

Ivey PMI in Canada is the only PMI that is calculated (when compared with US, Europe and Australia where at least two are used) and it is important as being a single release it is basically showing the state of the economy, if it is expanding or contracting, with the 50 level being the line in the sand between contraction and expansion, or recession or boom.

The classical releases should be watched as well like the Retail Sales, GDP (Gross Domestic Product), Manufacturing data, etc, but if I choose to pick the most decisive factor besides Bank of Canada interest rate decisions, it will be oil.

Speaking of Bank of Canada, any meeting is being followed by a press conference and during the press conference questions are being asked and therefore volatility is increasing.

Important Economic Releases to Watch in United States

When it comes to United States, we must start with the fact that this is the biggest economy in the world and it goes without saying that a lot of important economic news are being released each and every month.

Because the central bank of the United States, the Federal Reserve, is having a dual mandate, it is obvious that jobs data (Non-Farm Payrolls) and inflation (CPI) are the ones that really matter. However, there are some other pieces of economic releases that influence markets, as follows: ISM (Institute for Supply Management) Manufacturing and Non-manufacturing (these are the equivalent of Europe’s PMI’s mentioned a bit earlier, Retail Sales (released on a monthly basis), GDP (release on a quarterly basis), PPI (Producer Price Index), ADP (private payrolls), Durable Goods Orders, etc.

What to Expect from Economic Releases?

Expect a lot of volatility when Bank of Canada is meeting and when the press conference is starting. Any interest rate decision can be downplayed at the press conference to follow so unless the tone used during the press conference is in line with the actual release, market will stay with the conference and not with the interest rate decision.

For example, let’s assume that Bank of Canada is cutting the rates on the back of lower inflation levels and as a consequence the USDCAD pair is moving lower. However, at the press conference the Governor may say that the central bank is looking for inflation to pick up later in the year and just like that the USDCAD will find support on any dip lower and eventually will reverse course.

It is worth noting that the USDCAD is a currency pair known as having low liquidity and this means moves are sharp and strong, leaving no room for error when a trading decision is being made.

FOMC (Federal Open Market Committee) is meeting every six weeks and forward guidance and economic projections are being published as well as a press conference every 2-3 meetings. During these events, the US dollar is moving sharply and as a consequence all US dollar related currency pairs are moving as well, USDCAD included.