The USD / CAD currency pair is one of the currency transactions with high liquidity. Due to the comparatively low Canadian trade weight, the economic significance of the exchange rate is not comparable to that of, for example, EUR / USD or USD / JPY.
In return, the Canadian dollar has a special charm due to its status as a commodity currency.
Investors who have a long position in USD CAD expect the US dollar to appreciate in favor of the Canadian dollar. Conversely, market participants who trade a short position in the US dollar Canadian dollar currency pair expect the USD to depreciate. The exchange rate is influenced by monetary and fiscal policy as well as by the economy, growth, the development of raw material prices and market considerations.
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Properties of USD / CAD Currency pair:
- Rather low liquidity
- As expected, surprising reactions to market events are
- Insider designation: Loonie or Fund
- Negative correlation too Currency pairs with USD in second place
- Trading primarily takes place in the New York session
Trading USD CAD with Forex: Process of a currency transaction
Every currency transaction on the Forex Market consists of several transactions. If an investor wants to trade a long position in the US dollar Canadian dollar with Forex and thereby speculate on an appreciation of the USD, he must first take out a loan in CAD. USD is then bought with the borrowed liquidity. That is why a long position in jargon means that "dollars are bought" and "Canadian dollars are sold". After the two transactions, the position therefore consists of a loan account in CAD and an investment account in USD. If the investor is correct and the USD appreciates against the CAD, he can then repay the loan in CAD in full without having to fully use the USD balance. The difference corresponds to the profit.
Other possible combinations with the Canadian dollar
- CAD / EUR
- EUR / CAD
- USD / CAD
Trading in USD / CAD can be understood as a combination of a CAD loan account on the one hand and a USD investment account on the other.
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USD CAD exchange rate in both quoted and quoted prices
The US dollar Canadian dollar exchange rate is shown in financial media in both quoted and quoted prices, This can cause confusion because, for example, an increase in the USD goes hand in hand with a downward price trend in the chart. The quantity listing with the USD as base currency indicates how many units CAD are paid for USD 1.00. The price quotation corresponds to the reciprocal of the quantity quotation and indicates how many units are traded for USD 1.00 CAD.
In technical jargon, the quantity quotation is referred to as indirect quotation, the price quotation as direct quotation.
Further possible combinations with the USD and its insider names
- USD / JPY - the yen
- USD / CHF - the Swissy
- USD / CAD - The Loonie
- EUR / USD - The Euro or no label
- GBP / USD - The Cable
- AUD / USD - The Aussie
- NZD / USD - The Kiwi
Depending on the source of the economic data and the complexity of data collection and data evaluation by the trader, it is advisable to know both the official and the insider names of the exchange rates.