As one of the world's most traded currency pairs, the USD/CAD relies heavily on the United States' and Canada's strong economic and trade partnership, close geographical location and numerous similar economic policies.
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History of the USD/CAD
Needing no introduction, the US dollar which dates back to 1792, is the most popular and sought-after currency in the world today. Any currency paired with the US dollar will amass close scrutiny and interests among traders at the same time.
The Canadian dollar meanwhile, is like the lesser known twin of the US dollar. It became a free-floating currency in 1970 controlled by the Bank of Canada (BoC), the country's central bank.
USD/CAD in a Nutshell
- The quotation for this pairing tells how much CAD can be bought with one US dollar.
- Normally, the US dollar is the stronger of the two currencies. It only leveled each other briefly at 1:1 towards the end of the great recession.
When quoted, this pair would read as 1 US$ per X Canadian dollar. For example, if the pair's value is 1.250, it equates to $1.250 Canadian dollars needed to buy 1 US dollar.
Instances of USD/CAD Equality
The USD/CAD has seen a price equality a few times before. Following the Great Recession of 2007-2009 and the subsequent easing from the U.S. Federal Reserve, the Canadian dollar even rose over the US dollar before closing at around $0.95.
In fact, previous parity in the value of the Canadian dollar and the US dollar have happened shortly after every period of economic instability and recession in the US economy.
USD/CAD Trading Strategy
The USD/CAD currency pair has a history of moving rapidly, making strong moves before spending quality time consolidating. This paved the way for traders trading this pair based on the bounces from the trend and support of resistance levels. This simple strategy has delivered small profits over the years. Another strategy is by watching closely for any breakout moves from the currency pair that can produce big profits even in a span of a few months.
Factors Affecting the USD/CAD Pair
The value of the US dollar affects all the currencies it is paired with. Because of this, any difference in the interest rates between the Bank of Canada and the Federal Reserve of the United States greatly affect the value of these two currencies.
The value of the Canadian dollar meanwhile, is heavily correlated with the price of commodities. Because Canada rely greatly on oil, any movement in the prices of oil in the country can also affect the current value of the USD/CAD pair.
Other factors that impact the value of the USD/CAD are hike in interest rates, monetary policies, banking laws of other countries, and the supply and demand of oil around the world.
Why Trade USD/CAD?
Traders like trading this currency pair for the simple reason that it is one of the most liquid forex pairs to trade. For many traders, liquidity is the most important aspect they consider.
Another reason is the stability of the USD/CAD currency pair. At the same time, the pair also exhibits volatility that allow traders to have the opportunity of making profits from the pair's exchange rate value movement.
Trading USD/CAD via CFD
Traders can trade the currency pair of USD/CAD by entering a forex contract, or trade via Contract-for-difference (CFD) by speculating on the price difference between the start and end of the trade.
CFD is a financial instrument brokered between a broker and a trader or investor, where one party agrees to pay the other party the difference in the price of the asset between the beginning and conclusion of the trade.
Why Trade Currency Pairs in eToro?
eToro’s user-friendly interface and innovative trading platform permits traders to trade on their own time with zero transaction fees on currency trades. eToro also allow traders to trade for $30 for every $1 in their portfolio because it gives out a x30 leverage for currency pairs such as the USD/CAD.
How to Trade USD/CAD Currency Pair on eToro?
- Login or create an account with eToro if you don't have one.
- Click "Discover".
- Select "Currencies".
- Choose "USDCAD".
- Choose "BUY" or "SELL" depending on the how you wish to trade.
- Enter an amount or number of units you wish to trade.
- Set the stop loss, leverage, and take profit parameters.
- Click "Open Trade".
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