USD/CAD is what's known in the finance industry as a currency pair. Currency pairs are trading assets with a value that's derived from a very basic questions, “How many units of the second currency in the pair can be purchased using only a single unit of the first currency in the pair?” The answer to the question is essentially the value of the currency pair. In the world of binary options, traders make money by predicting whether the value of currency pairs will rise or fall. That is what forex binary options are about. So, in the case of the USD/CAD currency pair, if the trader believes that the United States Dollar will rise in value faster than the Canadian Dollar, the trader would purchase a call option. Adversely, if he believes that the value of the CAD will rise faster than the value of the USD, he would purchase a put option.
Historic USD/CAD Price Movements
Going back to mid-2005, the USD/CAD pair was off to a relatively strong start. As economic conditions around the world continued to improve, the value of the United States Dollar rose at a far faster rate than the value of the Canadian Dollar. However, this started to change in 2007 as investors started to become more and more concerned with sub-prime mortgages in the United States. As a result, in the year 2007, the value of the USD fell dramatically; leading to declines in the value of the currency.
However, soon, worldwide economic conditions would follow the path of economic conditions in the United States; causing the CAD to fall in value and leading to an increase in the value of the USD/CAD currency pair. Nonetheless, the increase wouldn't last long. By the end of 2009, the value of the USD fell dramatically as the US economy proved to be struggling along with the rest of the world. From there, the pair saw slow and steady downtrends until 2011.
In 211, the value of the USD/CAD currency pair started to climb dramatically yet again. At this point, the low interest rate and bond buying program put in place by the Federal Reserve finally started to spur economic growth in the United States. Since 2011, the value of the USD/CAD has continued to climb as bullish activity in the US markets and US economy continue to push the USD up at a faster rate of growth than the CAD.
What Causes Movement In The USD/CAD Currency Pair?
No matter what currency pair you're trading on, there are three things you'll want to pay attention to. Those are worldwide economic conditions, economic conditions in the region represented by the first currency in the pair and economic conditions represented by the second currency in the pair. Financial news should be monitored for that kind of information. With regard to the USD/CAD pair, this is how it all works…
- Worldwide Economic Conditions – In times where the worldwide economy is unhealthy, we tend to see declines in the value of the USD/CAD currency pair as the Canadian dollar tends to hold value better than the United States dollar.
- Economic Conditions In The United States – When economic conditions in the United States are positive, the USD grows; as a result, we see increases in the value of the USD/CAD currency pair. It's also important to watch the Federal Reserve as monetary policy changes tend to make waves in the USD chart!
- Economic Conditions In Canada – When economic conditions in Canada are positive, we tend to see the value of the USD/CAD currency pair decline as the value of the CAD rises. Adversely, in times of economic hardship in Canada, the value of the USD/CAD currency pair tends to rise.