The exchange rate of the USD/CAD can also be affected by other economic and political forces on both sides of the border. Whenever the Federal Reserve intervenes in activities on the open market, in a bid to strengthen the US dollar, the USD/CAD cross will see its value increase because it will take more Canadian dollars to buy a stronger US dollar. For instance, the interest rate differential between the Bank of Canada and the US Federal Reserve will affect the two currencies’ values in relation to each other. Trading the Loonie requires a deep understanding of the various factors that affect the values of the US and Canadian dollars, both in relation to each other and in relation to other global currencies.
The Loonie gained its name from the picture of a bird, known as a loon, which appears on the back of the coin. The USD/CAD forex pair is popularly referred to as the “Loonie.” “Loonie” is a colloquial term that refers to the Canadian dollar coin. This marked the beginning of trading online between the USD and the CAD. At that time, the value of the Canadian dollar was fixed in terms of gold, and it was valued at par with the U.S.
Trading The “Loonie”īetween 18, the Dominion of Canada was under the gold standard. For example, if the USD/CAD exchange rate is 1.32, it means that 1 USD is equal to 1.32 Canadian dollars. As stated above, the price quote of the USD/CAD essentially represents the number of dollars it would take to acquire one Canadian dollar. When the opposite happens, that is, the price of the USD/CAD is falling, the Canadian dollar is increasing in value in comparison to the USD. To put it into perspective, when the price of the USDCAD pair is rising, it means that the USD is strengthening over the value of the Canadian dollar. The USDCAD is an exchange rate that specifies how many CAD can be converted into one USD. The USDCAD currency pair represents the price of the base currency (USD) in relation to the quote currency (CAD). The major currency pairs are the most frequently traded on the Forex market, and as a result, they have huge daily trade volumes, enjoy tighter spreads and are more liquid than the minor currency pairs. This currency pair belongs to the “majors” group as it contains the US dollar, which is recognised as the most powerful and popular currency in the world. The USDCAD is the ticker for the US dollar (USD) to the Canadian dollar (CAD) exchange rate in the forex online trading markets.