EUR CAD trading in Forex - how it works!
The EUR / CAD currency pair is an important FX currency pair, even if Canada is far less important in terms of economic performance and trading volume than the euro zone, the United States or Japan. The Canadian dollar is considered a "commodity dollar" due to Canada's resource reserves.
Positioning for or against one of the two currencies works like all other currency pairs. If a market participant expects the EUR to appreciate, he can trade a long position in the EUR CAD. If an investor wants to trade the Canadian dollar and bet on a devaluation of the EUR, he must position himself short.
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Properties of the EUR / CAD currency pair:
- Lower liquidity than USD / CAD or EUR / USD
- Trading takes place in the European and American sessions
- Use strategies that include price developments of raw materials
- Canada is one of the world's most important raw material exporters.
- EUR / CAD trading benefits from the comparatively stable Canada. Economic development
EUR CAD Forex trading: Process of a currency transaction
In practice, positions are opened and closed with a click of the mouse. The platforms of the FX brokers execute the two transactions that underlie every currency transaction simultaneously in a fraction of a second. In order to be able to trade a long position in the Canadian dollar euro with Forex, an investor first takes out a loan in CAD and at the same time invests the entire loan amount in EUR. If there is an appreciation of the EUR against the CAD and the position is then closed, the EUR balance is exchanged for CAD and the CAD loan is repaid. Due to the revaluation of the EUR, which corresponds to a devaluation of the liabilities in CAD, the entire EUR balance does not have to be spent on the repayment: The remaining remainder is posted as a profit.
At EUR / CAD trades are exchanged for Canadian dollars when the euro is up and euro is exchanged for profit after the trade is completed.
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EUR CAD exchange rate in quantity and price quotation
If the Euro Canadian dollar exchange rate is given in the form EUR / CAD (EUR is on the left), the EUR is the base currency. When quoting in the format of the quantity listing, the market value expresses how many CAD units are currently being paid for 1.00 EUR on the market. In the format of the less commonly used price quotation, the price indicates the number of EUR units that are traded for 1.00 CAD. The price in price quotation is the reciprocal of the price in quantity quotation.
When quoting the currency rate, a distinction is made between quantity and price quotation. As a rule, the quantity quotation can be found in the EUR / CAD currency pair.
The view of the raw materials of Canada
Canada is one of those countries with a focus on raw materials and Mining. For this reason, the Canadian dollar is also referred to as the Commodity Dollar. With its very high levels of cadmium, zinc, nickel, sulfur and uranium, Canada is one of the largest producers and exporters. Canada takes third place worldwide in gold mining, lead mining, titanium and cobalt. With an import share of Canadian raw materials of 80%, the USA is one of the most important economic partners in Canada's export business. If political and economic crises affect the American dollar, this can have a direct impact on export demand for Canadian raw materials. Due to the high weight on raw materials, trading strategies with the inclusion of raw material developments should be selected in the Forex strategy.
The country also occupies an important position in the field of energy. Canada is one of the few net exporters of energy. After Saudi Arabia, Canada has the world's second largest natural gas and oil reserves.
Both the raw materials and the crisis-proof politics and economy of Canada lead to a comparatively stable course of Canadian dollar exchange rate. With its mineral and energy resources, Canada is one of the world's most important raw material exporters. With the USA as the main purchaser of Canadian raw material exports, the USD / CAD currency pair in Forex trading is particularly exciting in addition to EUR / CAD.
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Until 1970 the Canadian dollar was tied to the developments of the American dollar. Since this lifting, the commodity dollar has been a free exchange rate. The Canadian dollar is usually a rather sluggish exchange rate. Therefore, currency pairs with the participation of the Canadian dollar are primarily traded by risk-averse traders. The Canadian dollar is issued by the Banc of Canada. The Canadian dollar has grown significantly in value against the American dollar in recent years, with EUR / CAD being offered by almost all major online brokers. Trade training can and should take the form of demo accounts. Real market data and charts are already available to the forex beginner during training. Sideways movements, shoulder-head-shoulder formations, trends and trend reversal can already be learned in the demo phase. Data can be analyzed retrospectively up to 10 years using the EUR / CAD currency diagram.
EUR / CAD impresses with its durability as long as raw material prices remain stable and economic development in Canada is positive runs. Trader beginners can get to know essential trading characteristics while studying the charts and market data.
These trading strategies are recommended when trading with EUR / CAD
the trend-following strategy turns out to be a recommended strategy. Especially with continued growth in Canadian economic growth and falling or low unemployment rates in Canada. By eliminating the currency peg to the American dollar, American crises primarily affect US import power. EUR / CAD trading with Forex proves to be political and economic influences as a particularly sensitive trade.
For a better Forex strategy decision, it is also advisable to keep an eye on the currency pairs USD / CAD, EUR / USD and EUR / JPY. Experienced EUR / CAD traders can also try the scalping strategy. Since scalping depends on fast order execution, the scalping strategy for EUR / CAD involves an increased risk.
Scalping is one of the most aggressive trading strategies and should therefore only be used Traders with a high level of experience and trading level are practiced. If scalping is preferred, it is advisable to choose a ECN broker when choosing a broker. A current ECN broker comparison will help you choose.
The best trading results are achieved with open trading venues of the London Session and New York Session. During the European session from 8 a.m. to 5 p.m. GMT. The American session begins at 1pm-10pm GMT. Trading between 1 p.m. and 5 p.m. GMT is particularly recommended, since it is likely that most of the trading movements will take place in European and American markets during this period.
Trading strategies are recommended for EUR / CAD currency pair is the trend-following strategy and scalping for particularly experienced and experienced traders.
Conclusion: Not an underdog, but a serious currency pair
The currency pair EUR / CAD is not an underdog. Canada's good economic development can be seen as the foundation of this currency pair. Traders who are not yet sure to what extent they want to invest in the EUR / CAD trade can note their trades in the trading diary. In most cases, traders only learn which currency pairs suit them by testing and investing small amounts. In order to make statements for or against a currency pair on the basis of the test trades, at least 100 test trades are required.
Traders who trust in commodities and want to rely on them in their trading activities decide therefore for the Euro Commodity Dollar currency pair and possible currency pair combinations, such as the USD / CAD.