Currency and Commodity Trading Strategies, Commodity Traders Tips for Gold and Crude Oil Currency Pairs
When we consider currency and commodity trading it relates to the currencies of countries where a proportion of their output and exports are commodities, such as raw materials like copper, oil and precious metals and agricultural products like wheat, soybean or timber.
Clearly the currencies of a number of countries around the world could be called commodity currencies on this very broad definition. For the purposes of currency and commodity trading, the term relates to three major country currencies where a significant contribution to exports comes from commodities.
The Australian dollar, the New Zealand dollar and Canadian dollar are all affected by movements in the price of global commodities, with gold price movements strongly reflected in changes in the Australian dollar, while the Canadian dollar has a strong relationship with the price of crude oil. Meanwhile the New Zealand dollar (or Kiwi), while not linked to a particular commodity like the other two currencies, displays a general correlation with movements in the Commodity Research Bureau (CRB) Index.
So what happens when the gold price strengthens? We will see a similar rise in the Australian dollar in the AUD/USD pair (the Aussie), as all currencies trade in pairs. This means the Australian dollar is rising against the dollar, conversely the US dollar is weakening in that pair. When investors see economic uncertainties such as rising inflation or a recession, they may move into gold for its perceived safe haven status. Currency and commodity traders also look to the yellow metals link to the Aussie, possibly trading this pair as a proxy for gold.
Commodities contribute a significant proportion of Australias GDP and over 50% of its exports, with gold and other precious metals making a significant contribution. Trading charts show the very positive correlation of gold with the Aussie, which means a trader can either go for trading gold in the futures market or as an ETF, or follow the AUD/USD pair in the spot forex market.
Observers of the dynamics in currency and commodity trading will be aware of the major role played by Canada as a global commodities producer, particularly in its role as a key producer of crude oil. As such you will see a strong inverse link between crude oil price changes and the movement of the USD/CAD (the Loonie) pair.
The USA is the worlds largest consumer of oil and its biggest supplier is its next door neighbour Canada. While a high crude oil price is good for the Canadian dollar it is negative for both the US economy and US dollar. If a trader is bullish about crude oil prices they could go long on the Canadian dollar in the forex market, instead of buying oil ETF's or Nymex crude futures.
Looking at all three of these currency pairs gives currency and commodity trading followers a real opportunity to choose spot forex trading as a way of capturing the movements in the commodity markets, either for gold, crude oil or across the whole spectrum of commodities. There is always a bull market in currency trading, it just depends which currency in the pair you are long or short. - 23204
Clearly the currencies of a number of countries around the world could be called commodity currencies on this very broad definition. For the purposes of currency and commodity trading, the term relates to three major country currencies where a significant contribution to exports comes from commodities.
The Australian dollar, the New Zealand dollar and Canadian dollar are all affected by movements in the price of global commodities, with gold price movements strongly reflected in changes in the Australian dollar, while the Canadian dollar has a strong relationship with the price of crude oil. Meanwhile the New Zealand dollar (or Kiwi), while not linked to a particular commodity like the other two currencies, displays a general correlation with movements in the Commodity Research Bureau (CRB) Index.
So what happens when the gold price strengthens? We will see a similar rise in the Australian dollar in the AUD/USD pair (the Aussie), as all currencies trade in pairs. This means the Australian dollar is rising against the dollar, conversely the US dollar is weakening in that pair. When investors see economic uncertainties such as rising inflation or a recession, they may move into gold for its perceived safe haven status. Currency and commodity traders also look to the yellow metals link to the Aussie, possibly trading this pair as a proxy for gold.
Commodities contribute a significant proportion of Australias GDP and over 50% of its exports, with gold and other precious metals making a significant contribution. Trading charts show the very positive correlation of gold with the Aussie, which means a trader can either go for trading gold in the futures market or as an ETF, or follow the AUD/USD pair in the spot forex market.
Observers of the dynamics in currency and commodity trading will be aware of the major role played by Canada as a global commodities producer, particularly in its role as a key producer of crude oil. As such you will see a strong inverse link between crude oil price changes and the movement of the USD/CAD (the Loonie) pair.
The USA is the worlds largest consumer of oil and its biggest supplier is its next door neighbour Canada. While a high crude oil price is good for the Canadian dollar it is negative for both the US economy and US dollar. If a trader is bullish about crude oil prices they could go long on the Canadian dollar in the forex market, instead of buying oil ETF's or Nymex crude futures.
Looking at all three of these currency pairs gives currency and commodity trading followers a real opportunity to choose spot forex trading as a way of capturing the movements in the commodity markets, either for gold, crude oil or across the whole spectrum of commodities. There is always a bull market in currency trading, it just depends which currency in the pair you are long or short. - 23204
About the Author:
The author, William Davies, studies commodities closely and writes for an informational Commodity trading website. Discover more about how to profit from currency and commodity trading in the global markets.
posted by X - Men @ 11:29 AM
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