CAD - Multi Pair Analysis

Analysis of the CAD often calls for a multi pair and multi chart view. Given it's commodity relationships it can often be impacted by the prices of commodities. Oil, Wheat, Lumber, Natural Gas all can impact the markets evaluation of the Loonie. If commodities fall in price it (often not always) drives the value of the Loonie down against most currencies. This correlation with commodities takes a different approach when analyzing the CAD and that difference is to mix in a bit of commodity charts as well as currency charts. Lets take a look at a few snap shots of the Loonie against several other currencies.

CAD/JPY - This pair is highly related to the price of oil - Since Canada is a large oil producer and Japan is a large importer - Japan imports a lot of it's oil from Canada. We can see that the CAD has been falling against the JPY for quite sometime from an area above 100 Yen. 2800 pips it has fallen. Now lets look at the CAD vs The USD


The USD/CAD Pair has been rising since below 1.00 - 90 being the highest the CAD has been in many decades. The recent world economic turmoil has caused the USD to rise in value along with the JPY, many reasons are causing this movement. It's been a stead line all up to 1.30 area



Lets look at the two charts over top of each other ad see if there is a correlation between these two pairs. Wow you can clearly see it's very similar. Almost a mirror image of each other. This correlation is very strong since CAD trading is predominantly between the United States and Japan. Both of which are large Importers of Oil.



Pretty cool huh?

Now lets look at an oil chart. In mid July Oil hit it's all time high of 147.00+ Per Barrel and many were enjoying a nice wave until the trend reversed and the price tumbled. Do you see any correlations?



Here is the same oil chart overlaid with a chart of the USD/CAD Currency pair
Now do you see any correlations? If you do then you can see how watching commodity prices such as Oil can be of great benefit when trading the Loonie. Shortly after the price of oil started to tumble the Value of the Canadian dollar tumbled. Revisting these correlative outlooks can help make better trading decisions. Knowing which countries are a commodity based economy is very helpful when looking for good trades.