HedgeFundLIVE.com — Take a look at the USD/CAD chart. Notice any thing? The price action over the last year (at least) tends to revert back to parity like a magnet. The Loonie is a commodity currency, meaning it is driven by the country’s commodity exports, namely oil.
Oil has been rising in price lately, and so has the Canadian dollar. There are a few interesting aspects to the Loonie and oil being so closely related that can be used to invest in both. On the chart below, the currency pair tends to spike at the parity level, shown by the turquoise horizontal line.
Notice that the spikes occur from above and below parity, this should be a green light to any trader. The price action should be expected to remain comfortably volatile around parity for more time, creating a trade-able and profitable environment.
As long as the price of crude oil continues to rise, most likely through the summer, expect the USD/CAD to remain under parity. When oil backs off its highs, watch for the Loonie to depreciate against the USD.
Click Here for full article.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.