Trading USD/CAD

USD/CAD represents one of the most traded currency pairs in the world due to the large volume of cross border trading between the US and Canada. USD/CAD belongs to the major forex group as it contains the powerful US Dollar, while the Canadian Dollar is considered a commodity currency. The pair offers rich volatility, liquidity and tight spreads that attract day traders from all over. Read on to learn about the history of the USD/CAD, its benefits and drawbacks, trading strategies and technical analysis, ideal investing times and more.

USD/CAD Trading Brokers

Forex.com are a leading forex broker. Offering the largest range of currency pairs (80+) and some of the tightest spreads in the industry.
NinjaTrader offer Traders Futures and Forex trading. Use Auto-trade algorithmic strategies and configure your own trading platform, and trade at the lowest costs.
Trade with leverage on the FX market.
The leading US trading Exchange. Nadex offer genuine exchange trading to US clients on Binary Options. Fully regulated by the CFTC.
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Rockfort Markets offers competitive pricing on a wide range of major, minor and exotic currency pairs through MT4 and TWS.
Exinity Trader Pro supports major, minor and exotic forex trading on MT4 and MT5 platforms.
Trade on a handful of the most traded currency pairs with leverage.
Use digital options to take straightforward buy and sell positions on a range of currencies.
Trade on FX pairs with 1:500 leverage.
Zulutrade provide multiple automation and copy trading options across forex, indices, stocks, cryptocurrency and commodities markets
IB Boast a huge market share of global trading. With a minimum deposit of $10,000 however, they remain an option for larger traders only.
One of the largest discount brokers in the US, with a fixed trading commission and access to a large array of trading products and securities
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Why Day Trade USDCAD?

The USD/CAD currency pair is the fifth most traded forex pair in the world. Therefore, it’s no surprise that it’s often highlighted on popular trading platforms and exchanges. But why should you invest in USD/CAD?

  • Prevalence – It is one of the most traded pairs in the FX market, representing a significant quota of daily trade. The US Dollar is also the world’s leading reserve currency.
  • Volatility – As the pair is widely traded, it leads to high volatility, thus, providing tight spreads. This ensures plenty of opportunities to make trades and profit from price fluctuations.
  • Resources – With the number of tools available nowadays, short and long-term forecasts are easier to make. Live candlestick charts, for example, help you access real-time and historical graphs with customisable indicators and pivot points. Furthermore, multiple websites give you access to investing forums with ratings on trader sentiment and market outlook. These forums are often full of weekly projections and predictions for today based on multiple data points.
  • Exclusivity – The USD/CAD has unique qualities. As neighbouring countries, its economies run in parallel, taking away uncertainties from overseeing distant economies. Major economic news is also released on the same day and both currencies also run under the same North American trading session.

Drawbacks

  • Volatility – While high levels of volatility can result in winning positions, it can quickly lead to losses. Another key factor affecting USD/CAD volatility is major economic news on US non-farm payroll and Canada’s employment reports, which are released on the same day. Thus, it is advised not to enter or hold a position when using scalping strategies.
  • Leverage – As with stock trading, utilising leverage can increase profits, it can also magnify losses. Because of the pair’s volatility, utilising leverage can be unpredictable. Thus, forecasting ahead to next week or later into 2021 is essential for risk management.
  • Automated competition – You can access attractive bid-ask spreads, competitive USD/CAD futures and ETFs. However, competition nowadays is fierce. Most traders have to compete against sophisticated trading algorithms. Even if you manually analyse and react to the market, you’ll be competing with bots that enter and exit positions when pre-determined criteria have been met.

Influences On Movement

There is a multitude of factors to consider in the USD/CAD relationship. However, the following are key to influencing the currency pair’s conversion rate.

United States Influence

  • Balance of trade and investment – Analysts often cite this as the most important influence on the value of the Dollar. The balance of trades represents the difference between what the US exports and imports. A trade deficit can affect the Dollar foreign investor sentiment. On the other hand, if the US imports more than it exports, foreign investors will try to offset the difference by buying Dollar-denominated assets.
  • Politics – Political affairs can impact the strength of the US economy, so it is important to keep an eye on political affairs. If financial policies are unstable, investors may lose faith in the economy and resist buying the USD. Confidence in the US presidency, government administration and congress can also cause investors to flock. Further, tax cuts can fuel consumer spending, improving the economy. On the other hand, tax increases can also lessen budget deficits.
  • Economy – A strong economy will raise the confidence of investors. It’s helpful to look out for America’s industry and economic indicators. Factors like manufacturing growth, level of outsourcing, employment growth and wage data can affect the value of the US Dollar.
  • Interest rates – Naturally, investors want to capitalise on higher interest rates. Thus, the decisions made by the Federal Reserve Bank are important to monetary policy, which immensely affect the value of the Dollar. These reports provide an idea of where the currency is headed in the future.

Investing in the USDCAD forex pair

Canadian Influence

  • Commodity prices – As a commodity currency, it’s no surprise that the value of the Canadian Dollar strongly correlates to the world’s live commodity prices. Commodities represent a large share of exports in Canada, thus when the price of oil rises, its goods become more valuable. With an increase in purchasing power, this movement will be reflected in a higher exchange rate.
  • International trade – When exports exceed imports, it puts upward pressure on the exchange rate. On the other hand, a trade deficit will put downward pressure on the Canadian Dollar.
  • Interest rates – Similarly to the US Dollar, higher interest rates in Canada will attract investment. Notably, the decisions to raise or lower interest rates made by the Bank of Canada today can affect the future performance of the CAD.

Investing in the USDCAD

Currency Correlations

What may not be clear when trading on your USD/CAD live chart is the effect of currency correlations. No single pair trades are completely independent of other currencies. These relationships varying by dates are known as positive and negative correlations.

  • Positive correlation – This means that pairs move in the same direction as each other. For example, popular pairs, GBP/USD, AUD/USD, and EUR/USD, are all positively correlated. This is an outcome of the US Dollar being the counter currency. Any changes to the US Dollar will affect all pairs.
  • Negative correlation – When currency pairs move in opposite directions, they are negatively correlated. Popular pairs include USD/CHF, USD/JPY, and USD/CAD. This is a result of the US Dollar being the base currency. Negatively correlated currencies will suit hedging trading strategies.

Application

A USD/CAD trader can use this information to better understand the consequences of movement in certain pairs. But it is important to note that correlations do not always remain stable. For example, USD/CAD had a strong positive correlation of a coefficient of 0.95. However, the relationship deteriorated down to 0.28. Many factors can affect this such as economic impacts or decisions made by the Fed or BoC.

USD/CAD Day Trading Strategy

To trade USD/CAD effectively, it takes more than just analysing signals, keeping up with the latest news and pre-market sentiment. It also takes more than using pip values to your advantage. Below are some useful options and considerations.

Timing

When day trading in the forex space, timing is everything. FX trading may be available 24/7, but it doesn’t mean you should buy and sell all day. Instead, you want to trade when the USD/CAD pair is active, with plenty of volume and volatility. The danger is if you trade at the wrong times, the cost of spreads and commissions can cancel out profits.

Trading sessions in Canada and the US coincide, which means longer trading sessions but it can also mean more profit. Of course, higher trading volumes also make USD/CAD a lot riskier to trade with.

Ideal Window

So when is the best time to day trade USD/CAD? The ideal time is from 08:00 to 17:00 EST, which is the entire North American trading session. During this nine-hour window, the trading volumes are at their peak and you have better leverage.

Interestingly, the pair also sees its greatest daily volatility on a Friday, which can be due to traders adjusting positions ahead of the weekend. Spreads are normally tightest during this window, which can result in the greatest opportunities to generate profits. During this window, forex forums are also active.

All these factors can result in the biggest profit potential. Therefore, you should make sure to check for intraday volatility and probably invest your trading capital during this time slot.

Buying & Selling USD/CAD

The USD/CAD has a tendency to make solid moves promptly, which follows a considerable period for consolidation. So, live charts and technical analysis will be needed to succeed in trading this FX pair.

Trading the USD/CAD can be based on some simple technical strategies. For example, you can trade based on bounces from trend lines or support and resistance levels. This steady strategy can supply many small profits over a period of time. On the other hand, traders can opt for a more aggressive strategy that delivers large profits in a short period. This involves watching out for inevitable breakout moves from the pair.

The most intense trading sessions occur at the release of economic reports such as non-farm payrolls, unemployment rate, economic sentiment, manufacturing and non-manufacturing activity growth. Thus, trading during these events without the help of technical analysis can be done using a proactive, a reactive or a mixed strategy. Proactive trading involves entering a position ahead of the release of today’s data, for example, and basing your decision on forecasts. A reactive approach involves entering the market after the data is published. Finally, a mixed approach combines the two.

News

The latest market news updates on the USD/CAD currency pair can quickly impact market sentiment and create shifts. You can capitalise on the right moments, but only if you understand how the markets reacted historically.

Since this pair is significantly affected by the oil sector, you should be aware of OPEC meetings that involve oil selling countries like Canada and the USA. These deliberations can help you forecast which currency will have bigger demand in the future. You should also keep an eye on the decisions made by the Fed and BoC. As mentioned before, these two banks make important decisions on interest rates and monetary policy, which have an immense effect on the value of the US and Canadian Dollar.

Make sure to keep on top of the latest news updates, along with daily, weekly and monthly forecasts. Utilise technical analysis on live charts, the latest spot exchange rate, plus forecasts and forums. The following are some popular resources:

  • XE calculates real-time daily exchange rates and quotes
  • TradingView provides charting tools, market news and real-time information on currency conversions
  • IG is a leading forex trading platform with excellent tools alongside 5 year, 10 year and 20 year charts

History

Before you start live chart investing, it’s important to gain an in-depth understanding of the USD/CAD history.

Early USD/CAD History

The US Dollar was created during The Coinage Act of 1792 when the United States Congress appointed it as the country’s currency. Paper banknotes were introduced into circulation in the mid-1800s. In 1913, the Federal Reserve Act created the central bank of the US; the Federal Reserve. It is still regarded as the world’s unofficial reserve currency after the introduction of the Bretton Woods monetary system in 1944.

On the other hand, in the early 1850s, Canada departed from the colonial pound sterling and shifted to the Canadian Dollar. Up until 1970, the CAD was attached to the USD, but it is currently a free-floating currency controlled by the Bank of Canada. It’s also nicknamed as the ‘loonie’, derived from the loon bird that appears on Canadian Dollar coins.

Recent USD/CAD History

The historical exchange rates of USD/CAD were affected by recent key events. The Canadian Dollar reached parity with the US Dollar on September 20, 2007. It had been the first time in close to 31 years. Other points of USD/CAD parity were after the Great Recession when the Federal Reserve had subsequent quantitive easing. The Canadian and US Dollar eventually reached a parity of 0.95.

In fact, most instances of parity were related to periods of financial difficulty in the US or during high oil prices. For example, in 2016, the price of oil slumped to a low, trading at less than $30 per barrel. During this time, the Canadian Dollar hit a record low of 1.46 CDN to the USD.

The US to CAD FX rate between 2008 to 2018 has been anywhere between 0.94 and 1.46. The two have been relatively close in value over the decade. During 2011 to 2012, the CAD was worth more than the USD. This was when the USD/CAD exchange rate briefly dipped below 1.00. Since then, the US Dollar has shown a steady increase in value against the Canadian Dollar, particularly in mid 2015. During this time, the US Dollar was also in a general uptrend against most other major currencies.

Role Of The USD

After understanding key events in the USD/CAD timeline, it’s important to grasp the role of the US Dollar to make future rate predictions.

The United States is the world’s largest economic power, representing almost 25% of the global nominal GDP. The country’s economy is primarily service-oriented, with 80% of its GDP coming from sectors like real estate, transportation and financial services. Since the US Dollar is the most traded currency in the world, it is affected by many factors. As already mentioned, key influences include the various reports issued by the Fed.

Other major economic indicators:

  • ISM Non-Manufacturing
  • ISM Manufacturing
  • Consumer Price Index
  • Producer Price Index
  • Trade Balance

Role Of The CAD

While you might focus your attention on the strength and role of the US Dollar, it’s important to consider the vital role the CAD plays too.

Canada is the fourteenth biggest economy in the world. It closely resembles the United States with its market-oriented economic system, types of production and high standard of living. Canada’s economy is typically known as a resource-based economy, as it mainly relies on the export of its natural resources such as wood, grain, minerals, and petroleum. Nonetheless, more than two-thirds of its GDP comes from its service sector.

Other major economic indicators are:

  • Ivey Purchasing Managers’ Index
  • Consumer Price Index
  • Unemployment Rate
  • Trade Balance
  • Retail Sales

The 1989 Free Trade Agreement between Canada and the US removed the majority of trading tariffs between the countries. The Bank of Canada is also a major influence on the Canadian Dollar as it enacts policies that promote economic and employment growth. A daily, weekly, monthly and annual exchange rate chart is available on the BoC website.

Final Word On Trading USD/CAD

The USD/CAD currency pair promises volume, volatility and tight spreads, which provide plenty of opportunity to yield profits. However, there are many factors to consider like economic data releases, central bank statements and the latest market news.

You must be ready to conduct your own expert analysis, utilise interactive daily, weekly and historical charts, trends and news resources. Make sure to maximise the quality of your trades in the ideal window when the pair is most liquid. You can also invest in a trusted OTC broker such as Oanda. If you follow the guidance outlined on this page, you too can go in search of those rich forex profits.

FAQ

When is the best time to trade USD/CAD?

The USD/CAD market hours align with the North American trading session between 08:00 and 17:00 EST. This is when the FX pair is most liquid and volatile. Make sure to invest your trading capital during these times to ensure quality of trades.

How much is 1 USD in CAD?

The USD to CAD exchange rate is always shifting. See a live chart for the latest rate between the two popular currencies.

Is the USD stronger than the CAD? 

The historical exchange rate of the two is always fluctuating, with both currencies being stronger than the other across various points. However, since 2015 the US Dollar has maintained a superior position to that of the Canadian Dollar.

Can I e-transfer USD to CAD?

Yes. There are many services available that allow you to e-transfer USD to CAD and vice versa. For example, TD provides competitive exchange rates and ensures your transactions are processed safely and securely.

Should I trade with USD/CAD?

When done effectively, the profit potential can be fruitful. This is because USD/CAD provides high volumes and tight spreads. It also features two major currencies, with the US Dollar being the world’s top reserve currency. Investors can make use of simple strategies like trading based on bounces from trend lines or from support and resistance levels. Alternatively, you can opt for more aggressive strategies that deliver large profits in a short space of time. During major economic releases, a proactive, reactive or mixed approach to the news can also prove prosperous.