Forex trading is a valuable investment tool for people all over the world. Forex is the act of trading world currencies (Foreign Exchange), and is more accessible for individuals than other forms of investments. It is charged with excitement and elements that keep an investor on their toes. The act of trading can even become a sport as much as a financial tool for the dedicated investor.
Understanding the CAD Pairing Influences
There are only seven currencies that have a big impact on the Forex market, and the “loonie” as the Canadian Dollar is sometimes called is one of them. Backed by the Bank of Canada, it is used to balance economic growth and employment without adding to inflation.
When investing in CAD pairings it is important to know what drives the rates related to the currencies. Industrial and retail trends in sales and production have a major influence on what happens with any government’s monetary value. A smart investor will watch more than the ticking lines of an exchange chart. They will keep an eye on news, events, trade reports and resources like Bloomberg or Wall Street Journal.
Employment is another major influence on the value of CAD pairs. Some new investors ignore the importance of this economic signal, but if consumers do not earn money to spend, the businesses that provide products fail as well. In fact, employment levels often foreshadow movement in the GDP.
In periods of economic strife a currency with a strong interest rate from a well-developed country are safer choices. Another factor that makes the CAD a popular choice for traders is that it is closely tied to the U.S. A lot of trade exists between the close neighbors helping to bolster the stability of the Canadian economy.
The CAD may not be able to fight the USD as a pair, but it is strong enough to be a considered for a good choice against Euros and some other falling currencies, such as the Yuan.