There are many currencies that are traded in the world forex markets but only 7 of them contribute to almost 85% of the trading. Canadian Dollar also called The Loonie, is one of the top six currencies traded in forex markets and traders most-often hold it as reserve.
The CAD/USD is a popular currency pair. The exchange rate of this pair keeps varying due to the trade relations between the USA and the Canada. Here are some considerations for Cad forecast in relation to USD and other currencies.
- Oil prices
When America imports Oil, its preferred trading partner is Canada. In fact, Canada is one of the leading exporter of crude oil and petroleum products. Canadian dollar fluctuates with changing oil prices. Any increase in commodity products, causes a boom in the CAD and vice versa.
- Strength of the US Economy
The USA is an important trade partner for Canada. It imports nearly 74% of Canadian exports. So the strength of the US economy plays a significant role in CAD forecast. This factor is to be considered not only for the CAD/USD pair but also while determining exchange rates for other currencies in respect to CAD.
- Trade Policies of China
China and Canada have a good trade relationship. Canada exports products like wood pulp, paper, agricultural products, seeds, fish etc. Canada attracts a huge number of Chinese expats and is considered as an attractive real-estate investment destination to Chinese investors. All these factors make it necessary to take into account the trade policies of china when determining the CAD forecast.
- Prices of Forestry Products
Canada is the largest exporter of forestry products such as wood, paper, wood pulp etc. The availability of huge tracts of lands and resources like great lakes and river basins and the cheap transport of wood logs from Canada to the USA through the Colombia and Hudson rivers makes forestry industry in Canada very competitive. Forestry industry plays a crucial role in the exchange rate of CAD.
- Minerals and Precious Metals
Canada has vast quantities of natural resources like minerals, gem stones and precious metals like gold and silver. Some of the large gold mining companies are based in Canada. Most of these items are traded in US Dollars and have an inverse relation to the Loonie. If the price of CAD falls, they attract huge investments.
The CAD is a commodity currency and is very volatile in comparison to other currencies. Consider these 5 important factors when you want to do a CAD forecast. These factors need to be considered not only for USD/CAD but also for forecasting other currencies and CAD pairs.