How Oil Moves with USD/CAD

The charge of forex trade between Canada and the U.S. is often that is between strongly correlated to the price of oil. Over the long run, when the price of oil rises, the value of the Canadian dollar (CAD) (also called the loonie) usually rises relative to that of the U.S. dollar. That correlation can be directly attributed to the way Canada earns most of its U.S. dollars—from the sale of crude oil—and the percentage of Canada's revenue that this constitutes.

Well ..Lets talk about the other kind of gold, the black one.

As you can notice, the crude oil is most of the time cited to as the “black gold” or we here at WikiFX like to call it, “black crack.”

And One can live without gold, but when youre a crack addict, it will be hard for you to live without crack. Oil is like the antidote that runs through the veins of the global economy, the same it is a major source of energy and other economy.

Canada, being one of the top oil producers in the world, exports over 3 million barrels of oil and petroleum products per day to the United States. This surely makes it the largest distributor of oil to the U.S. And This highlighted that Canada is United States main black crack dealer!

Due to high volume involved, it produces a massive amount of demand for Canadian dollars. Also, notice that Canadas economy is depending just on exports, with about 85% of its exports going to its big brother down south, the U.S. And for this reason, USD/CAD can be greatly influenced by how U.S. consumers respond to changes in oil prices.

When the U.S. demand increases, manufacturers will need to order more oil to maintain the demand. This can lead to a rise in oil prices, which can guide to a fall in USD/CAD. While when the U.S. demand falls, manufacturers may choose to hang out, and this could affect demand for the CAD since the manufacturers doesn't need to purchase more goods.

Oil has a negative connection with USD/CAD of about 93% between 2000 through 2016. When oil rises up, USD/CAD goes down. When oil goes down, USD/CAD goes up. Vice-versa. And to make the relationship clearer, we can invert USD/CAD to highlight how both markets move pretty much at the same time (i.e., crude oil will gain value with the Canadian dollar while the U.S. dollar falls…and inversely related. Check it out in the chart below:

Check it out in the chart below:

Crude Oil vs. USD/CAD Inverted

Now, the next time you gas up your car and notice that oil prices are rising, then this information could be of importance for your use! It can act as a clue for you to go short on USD/CAD!

Out of the multiple Forex Brokers, Some allow you to trade gold, oil, and other commodities. You can readily pull up their charts using their platforms there. Also You can track the prices of gold on Yahoo! Finance. You can check the prices of oil on Bloomberg too.