The USD/CAD Pair Has Bulldozed Its Way into May – but Where to Next?
The Manhattan skyline for the USD/CAD pair is an interesting one. This currency pair has been range bound since the November 8 presidential elections, trading between 1.2967 on the low end and 1.3697 on the high-end. That represents a 5.62% fluctuation from the low price. As one of the more stable currency pairs in the world, the USD/CAD typically fluctuates around commodities like crude oil prices on the Canadian end, and Fed interest rate decisions, the DXY, and economic data releases on the US end. This oversimplification of the USD/CAD is a good starting point for binary options traders wanting to gain some insight into the pair’s volatility.
Is USD Strength Undermining the CAD?
Judging from the above chart, the prevailing exchange rate of 1.3673 is well above the 50-day moving average of 1.338 and the 200-day moving average of 1.325. This indicates dollar strength. To confirm this, let’s look at the US dollar index. Over the past 5 days, the DXY (US dollar index) has appreciated by 0.24%. On 25 April 2017, the DXY was trading at 98.84, and by 2 May 2017, it was up at 99.08. This marginal gain typically plays into the hands of dollar bulls when trading the USD/CAD pair. We can see this by the appreciation in the currency pair. However, for the year to date the DXY is down 3.23%, which contrasts slightly with the performance of the USD/CAD.
Part of the reason that the CAD has had a rough time of late is the price of oil. WTI crude oil prices and Brent crude oil prices directly impact the Canadian dollar, otherwise known as the loonie. The Canadian economy is heavily reliant on commodity prices like crude oil. Otherwise known as black gold or even black crack, crude oil is the lifeblood of Canada. According to stats, Canada exports 3 million+ barrels of petroleum and/or crude oil to the US alone per day. 85% of Canadian exports flow to the US, and so US demand for Canadian products plays directly into the hands of the strength/weakness of the CAD.
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