Crude oil correlations to forex pairs
Crude oil prices are rising through year-to-date highs. While seemingly unrelated to forex markets, historical correlations exist. Find out which currencies have moved with oil prices and what could happen if prices fall.
Key points
- Crude oil futures traded above $93 per barrel this week
- Canadian dollars and crude oil have been positively correlated historically
- USD/CAD is midrange year-to-date despite US dollar highs across major pairs
Are forex markets affected by oil prices?
Crude oil prices are soaring to YTD highs this week, due in part to production cuts overseas. Prices reached $94 a barrel midweek before dropping slightly.
While foreign exchange markets do not have any direct ties to a commodity like crude oil, in the past there have been correlations in price action. Historically, Canadian dollar has been positively correlated to oil - primarily because crude oil production serves as a major component of Canadian GDP.
CAD's relationship with crude oil may provide justification for recent prices in USD/CAD. Across many major currency pairs, dollar has been outperforming. Against Canadian dollar, however, USD finds itself near the midpoint of its 2023 price range. Trading near 1.3500, USD/CAD has been as high as 1.3800 and as low as 1.3100 this year.
How to trade USD/CAD
- Open an account to get started, or practice on a demo account
- Choose your forex trading platform
- Open, monitor, and close positions on USD/CAD
Trading forex requires an account with a forex provider like IG. USD/CAD can be found in IG's platform under the 'Major' pairs tab. Many traders also watch major forex pairs like GBP/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.
You can help develop your forex trading strategies using resources like IG’s Trading Academy. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.
Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.
This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. See our Summary Conflicts Policy, available on our website.
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