Forecast for Q1'17 - levels for USD/CAD - page 3

[Sergey Golubev]

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Press review

Sergey Golubev, 2017.03.21 08:33

Crude Oil and the correlation in trading: Crude Oil and the Canadian Dollar (based on the article)

Daily USD/CAD price is on secondary correction within the primary bullish market condition: the price is testing 50% Fibo level at 1.3291 to below for the reversal of the price movement from the correctional bullish to the ranging bearish market condition.

• "That there is a correlation between the prices of the Canadian dollar and crude oil. Using the same weekly historical data discussed previously, there is a correlation coefficient between the two of 0.34. This is a reasonably high level of correlation considering the high time frame used in the calculation (weekly) and the 13-year back test period. That means that the prices tend to move the same way, which is not surprising, as Canada is a major oil producer (ranked 5th in the world) and exporter (ranked 4th in the world). There are only two countries with larger known oil reserves than Canada. These facts make the “Loonie” (as the Canadian dollar is widely known) a major “petro-currency” whose relatively value is highly dependent upon the price of oil."
• "The relatively high correlation offers more opportunity than substitution: it can also be a basis for trading strategies. If we assume that the correlation is due to the price of crude oil acting as a kind of leading indicator of the future price of the Canadian dollar, then we could wait for oil to get significantly ahead or behind and be ready to trade the Canadian dollar in the same direction."

[Thien Do Van]

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