Key USDCAD Fundamental Drivers You Should Keep an Eye on


What are the key USDCAD Fundamental Drivers each traders should know? Find out in HYCM’s fundamental outlook on CAD, and pay attention already to the BOC meeting of next week.

17 January, 2020 | HYCM – The Canadian dollar has two main drivers you should always pay attention to, namely the Central bank policy and the price of oil. Next week, the Bank of Canada (BOC) is meeting to decide on its current interest rate. Hence, traders should count this in their USDCAD analysis.

What to expect next week from the BOC Meeting? 

In December 2019, the BOC surprised the markets with a more bullish outlook than the market was expecting. Back then, the BoC highlighted surprising strength in business investment, whilst the economy was operating ‘near capacity’.

On the one hand, the key area of concern for the BoC were the global geopolitical tensions. On the other hand, the market is optimistic since the US-China phase 1 trade deal got recently signed. If this market situation remains, I am expecting the BoC to lean towards a more bullish outlook when it meets on Wednesday, 22nd of January, next week at 1500GMT

How the Price of Oil Impacts CAD?

Did you know that the price of oil has an impact on the Canadian Dollar (CAD)? Considering that Canada is one of the key oil exporters, any oil price increase will boost the CAD. However, there is also a negative correlation between oil and the CAD, which is around 96%. Meaning, that if fall oil prices fall usually the price of USDCAD goes up, since CAD will drop in value. This is also happening vice versa, so if oil prices go up, USDCAD can go down in value since CAD will raise in value. Have a look at the chart below, where you can see the USDCAD and oil relationship portrayed.

Key USDCAD Fundamental Drivers

Getting back to the USDCAD analysis, the CAD price will be most of the time determined by the two main drivers we discussed before; the central bank and the price of oil. Hence, when you are trading CAD, it is highly important that you always pay attention to these two main drivers. In the best case, you would want that both main drivers compliment each other, before you even place a CAD trade. For example, if you expect next week a bullish central bank meeting and also a rise in oil prices. This would help you to understand the price action of USDCAD and gives insights for you to place the USDCAD trade for the next week. Vice versa, if you expect next week a bearish central bank meeting and a fall in oil prices, then you can expect the CAD to weaken.

This concludes HYCM USDCAD analysis. Benefit of USDCAD’s volatility this week. If you don’t have a trading account yet, then you can simply open a trading account with HYCM.  

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