As you may know, crude oil is often referred to as the “black gold” or as we here at BabyPips.com like to call it, “black crack.”
One can live without gold, but if you’re a crack addict, you can’t live without crack.
Oil is the drug that runs through the veins of the global economy as it is a major source of energy.
Canada, one of the top oil producers in the world, exports around 2 million barrels of oil a day to the United States. This makes it the largest supplier of oil to the U.S.!
This means that Canada is United States’ main black crack dealer!
Because of the volume involved, it creates a huge amount of demand for Canadian dollars.
[You must be registered and logged in to see this image.]
Also, take note that Canada’s economy is dependent on exports, with about 85% of its exports going to its big brother down south, the U.S. Because of this, USD/CAD can be greatly affected by how U.S. consumers react to changes in oil prices.
If U.S. demand rises, manufacturers will need to order more oil to keep up with demand. This can lead to a rise in oil prices, which might lead to a fall in USD/CAD.
If U.S. demand falls, manufacturers may decide to chill out since they don’t need to make more goods. Demand in oil might fall, which could hurt demand for the CAD.
Oil has a negative correlation with USD/CAD.
When oil goes up, USD/CAD goes down. When oi goes down, USD/CAD goes up.
So, the next time you gas up your car and see that oil prices are rising, you can use this information to your advantage! It may be a clue for you to go short on USD/CAD!
Some forex brokers allow you to trade gold, oil, and other commodities. There, you can readily pull up their charts using their platforms. You can also monitor the prices of gold on Bloomberg. You can likewise check the prices of oil on Bloomberg as well.
Our resident chartologist Queen Cleopiptra also touches upon commodity charts every now and then, so her blog is a treasure chest of information on gold and oil!
If you want to learn more about gold and other commodities, I suggest you ask our comdoll expert Happy Pip. Since she trades the commodity currencies, she often includes the price action of gold and oil in her analysis.