The US dollar and Canadian dollar form one of the most popular currency pairs. It represents a significant quota of daily trade. It's popular among both professionals and ultimate newbies.
The Impact on USD/CAD Volatility
A lot of diverse factors impact the US dollar. A list of the most important factors includes reports issued by the US Federal Reserve Bank (Fed). They help traders predict the changes of the Forex market in the future. One of the most important reports is Non-Farm Payroll numbers for the US published by the Bureau of Labor Statistics. It is an important indicator that characterizes economic conditions and it impacts a level of USD/CAD volatility.
Similar to other currencies, economic and political life events impact the fluctuations in the exchange rate. Traders follow news about US economic and political events to identify factors affecting the markets.
Read more: The Most Volatile Currency Pairs in 2022
Is USD/CAD a Good Pair to Trade
Let's consider why USD/CAD is a good pair to trade. One of the most essential reasons for trading this currency pair is its liquidity. This is one of the most liquid Forex pairs to trade. Liquidity is a critical factor considered by traders, whether it's day trading or swing trading. The higher the level of liquidity is, the better spreads are.
In addition, traders focusing on liquid currency pairs face little slippage costs in normal market conditions. This factor is often undervalued, but it can make a winning strategy differ from the strategy of breakeven or even losing.
Traders are interested in a high level of volatility to get profit from price movements. Some of the currency pairs have a low level of volatility and it makes them less attractive for traders.
On the one hand, the USD/CAD currency pair belongs to stable trading currency pairs. On the other hand, it has a high level of volatility, allowing traders to profit from its exchange rate price movement.
Read more: 10 Most Stable Forex Pairs to Trade in 2022
The analysis of the USD/CAD is suitable for both traders who use technical and fundamental analysis. Technical traders find recurring price patterns, including triangles, flags, Gartleys, and Bats. These price patterns provide traders with great trading opportunities. In addition, there are other patterns concerned by technical traders. The USD/CAD is a beneficial trading instrument for fundamental traders because of the high level of correlation with commodity resources.
Is USD Stronger than CAD
Regarding currency parity, USD is more than 20% stronger than the Canadian dollar. However, you don't need to pay attention to parity while strength is calculated. Strength is a measure of direction parity.
Acceptable Times to Day Trade USD/CAD
The Forex market is open 24 hours a day, five days a week. Traders can trade this currency pair at any time when the market is open. There are three primary sessions on the Forex market, including the London session, the New York session, and the Tokyo session.
Ideal Times to Day Trade USD/CAD
The most effective USD/CAD trading hours are during the US session, particularly during the overlap between the US and London sessions which starts at 8:00 AM EST (UTC\CMT - 5) and ends at noon. During this period, this currency pair is the most volatile. In addition, a huge number of news regarding the economic life of the USA and Canada are released within the period between 8:30 AM EST and 9:30 AM EST. It increases the level of volatility during the morning session.
During the Australian and Tokyo sessions, the currency is less traded. The spreads increase slightly during these overnight sessions. Due to the increased spreads and lower lliquidity, it's not recommended to open new positions during this time.
If you are a longer-term position trader and decide to enter during this period, this is not a great idea. In addition, this time isn't also suitable for scalp and intra-day traders who are looking for very short-term price swings. To get more profit, scalp and intra-day traders need to trade the USD/CAD currency pair starting from 8 AM EST till noontime.
You can consider the Forex market hours chart below.
| Trading session | Opening standard time (GMT) | Closing standard time (GMT) |
|---|---|---|
| New York (American) | 1:00 p.m. | 9:00 p.m. |
| London (European) | 8:00 a.m. | 4:00 p.m. |
| Tokyo (Asian) | 11:00 p.m. | 7:00 a.m. |
| Sydney (Pacific) | 9:00 p.m. | 5:00 a.m. |
How to Trade USD/CAD
Traders can speculate on the price difference of the USD/CAD currency pair using a contract for difference (CFD). When it comes to the CFD, this is a financial instrument between a trader and a broker. One party pays the other the difference in the value of security during a trade. Long and short positions are available.
If you are a CFD trader, you speculate on the direction of the USD/CAD currency pair. If you predict the hike of the USD currency price, you need to take a long position by utilizing the CFDs. If you predict the decrease of the USD currency price against the CAD price, you need to take a position by selling CFDs.
Read more: What are the Best Forex Currency Pairs to Trade
Final Words
In conclusion, the currency pair USD/CAD is a highly traded popular currency pair. One of the most important reasons for trading this currency pair is its high liquidity. The best time to trade this currency pair is a time when its volatility is high. This period starts at 8:00 AM EST (UTC/GMT - 5) and ends at noon. Scalpers and intra-day traders need to trade the USD/CAD currency pair starting from 8:00 AM till noontime to get more profit.
by , 2022.01.19