Currency and Commodity Trading Strategies, Commodity Traders Tips for Gold and Crude Oil Currency Pairs
As a keen trader if you study currency and commodity trading you will discover that it relates to the currencies of countries where commodities contribute a significant proportion of economic output as well as exports. These could be metals like copper, or crude oil, or agricultural products like sugar and coffee.
It would of course be correct to call the currencies of a number of countries around the world commodity currencies if we use a very wide description. For keen followers of currency and commodity trading however, the term refers to three major countries where commodities represent a substantial component of output and exports.
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.
When the gold price weakens, what can we expect to see happen? There is likely to be a similar fall in the AUD/USD pair (the Aussie), as all currencies trade in pairs. In effect we are seeing a weakening of the Australian dollar against the US currency, conversely the US dollar is strengthening in that pair. As the global economy comes out of a period of uncertainty, such as after a recession or falling inflation, investors may be more confident and so reduce their safe haven holdings of gold. Currency and commodity traders can see how gold affects the Aussie, and so go short this pair.
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.
Canada is a major oil supplier to its neighbour the USA, which in turn consumes more oil than any other economy. A low crude oil price would be bad news for the Canadian dollar, though positive for both the US economy and US dollar. Any trader bearish about the outlook for crude oil prices could as a proxy go short the Canadian dollar in the forex market, instead of going short Nymex crude or buying inverse ETF's in oil.
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. - 23210
It would of course be correct to call the currencies of a number of countries around the world commodity currencies if we use a very wide description. For keen followers of currency and commodity trading however, the term refers to three major countries where commodities represent a substantial component of output and exports.
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.
When the gold price weakens, what can we expect to see happen? There is likely to be a similar fall in the AUD/USD pair (the Aussie), as all currencies trade in pairs. In effect we are seeing a weakening of the Australian dollar against the US currency, conversely the US dollar is strengthening in that pair. As the global economy comes out of a period of uncertainty, such as after a recession or falling inflation, investors may be more confident and so reduce their safe haven holdings of gold. Currency and commodity traders can see how gold affects the Aussie, and so go short this pair.
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.
Canada is a major oil supplier to its neighbour the USA, which in turn consumes more oil than any other economy. A low crude oil price would be bad news for the Canadian dollar, though positive for both the US economy and US dollar. Any trader bearish about the outlook for crude oil prices could as a proxy go short the Canadian dollar in the forex market, instead of going short Nymex crude or buying inverse ETF's in oil.
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. - 23210
About the Author:
The author, William Davies, follows the commodities markets closely and writes for an informational Commodity trading website. Discover more about how you could profit by entering the global currency and commodity trading markets.
posted by X - Men @ 6:09 AM
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