USD/CAD price analysis: US dollar hits new high as crude oil prices fall
Canadian dollar has weakened along with falling oil prices - a relationship with historical precedent. Find out what key price levels each asset has recently passed.
Canadian dollar falls with oil prices
USD/CAD, representing the exchange rate between the United States Dollar (USD) and the Canadian Dollar (CAD), has recently achieved new year-to-date highs, surpassing the 1.3500 mark. This movement in the forex markets is a significant indicator for traders, reflecting broader economic trends and the interplay between two of the world's significant currencies.
One factor influencing the Canadian dollar's weakness is its positive correlation with crude oil prices. Canada is a major oil exporter, with the commodity being a substantial contributor to its economy. Therefore, fluctuations in oil prices often have a direct impact on the value of the Canadian dollar. With crude oil prices retracting from their $78 per barrel peak, there's a corresponding effect on CAD, which partly explains its depreciation against USD.
Despite this recent dip, both the CAD and crude oil prices remain within their established trading ranges, suggesting that the market has not entered uncharted territory. Instead, it reflects the ongoing market fluctuations that seasoned traders are accustomed to navigating. Understanding these patterns is crucial for those looking to capitalize on the forex markets.
Interestingly, with USD/CAD reaching new highs, data shows that 56% of USD/CAD traders at IG are currently short on this pair. This could indicate a belief among traders that USD/CAD is poised for a reversal, or it may reflect a broader market sentiment that expects the Canadian dollar to strengthen, potentially due to a rebound in oil prices or other economic factors.
For traders, this situation presents an opportunity to employ strategic positions. For instance, those who align with the majority and anticipate a CAD comeback might look for signs of stabilization or growth in the oil market as a cue to enter a short position on USD/CAD. Conversely, traders who believe the USD will continue to outperform might see the current market as a chance to go long.
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 YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. 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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