Trading the USD CAD Currency Pair

The three main types of currency pairs are majors, minors (crosses) and exotics. The major currency pairs are often the most popular to trade, as they are the most liquid. Minor currency pairs are ones which leave out the United States dollar, and they are normally less liquid. Examples include the euro and Swiss franc (EUR/CHF), Canadian dollar and Japanese yen (CAD/JPY), or pound sterling and Australian dollar (GBP/AUD). Cross pairs can provide trading opportunities when the majors are presenting less favourable conditions. This is because forex trading is simultaneously buying one currency and selling another.

What Is the Difference Between Liquidity and Volatility in Forex Markets?

Common cross currency pairs involve the euro and the Japanese yen. How active a market is, how many traders are trading, and trading volume determines its liquidity. Volatility is the measure of how drastically a market’s prices change. Lower liquidity commonly results in a more volatile market and causes prices to change drastically.

The price maker (usually a broker) gives you a rate at which they are willing to buy or sell a currency pair. Sometimes the term base currency may also refer to the functional currency of a bank or company, usually their domestic currency. For example, a British bank may use GBP as a base currency for accounting, because all profits and losses are converted to sterling.

Depending on your forex broker, you may see the following exotic currency pairs so it’s good to know what they are. While there are EIGHT major currencies, there are only SEVEN major currency pairs. Commodity currencies are those from countries that have large quantities of commodities or other natural resources. The exchange rate of the currencies of these countries are tied to their xm broker review respective export activities. This is because the strength of the economy can be highly dependent on the prices of their natural resources. Examples of these countries include Russia, Saudi Arabia and Nigeria.

major forex pairs

The value of the Canadian dollar is also highly correlated with the price of commodities such as crude oil. Because the Canadian economy is heavily reliant on oil, the price of oil dictates the state of the economy and the currency itself. For this reason, the Canadian dollar is often labeled as a commodity currency. Trading the USD/CAD provides high liquidity for investors, and the bid-ask spreads are generally more beneficial. No, exotic pairs are not exotic belly dancers who happen to be twins. Exchange rates fluctuate based on which currency is stronger at the moment.

Check out our list of forex trading strategies to find one that suits your trading personality and goals. When you buy a currency pair from a forex broker, you buy the base currency and sell the quote currency. Conversely, when you sell the currency pair, you sell the base currency and receive the quote currency. Due to the overall lower degree of liquidity, exotic currency pairs tend to be far more sensitive to economic and geopolitical events.

This meant it required 1.46 Canadian dollars to buy 1 U.S. dollar. The G10 currencies are ten of the most heavily traded currencies in the world, which are also ten of the world’s most liquid currencies. For example, a political scandal or unexpected election results can cause an exotic pair’s exchange rate to swing violently. The more frequently traded something is the higher its liquidity.

Base currency

Currencies are traded in fixed contract sizes, specifically called lot sizes, or multiples thereof. Many retail trading firms also offer 10,000-unit (mini lot) trading accounts and a few even 1,000-unit (micro lot). For example, while historically Japanese yen would rank above Mexican peso, the quoting convention for these is now MXNJPY, i.e. The value of the USD/CAD pair is quoted as 1 U.S. dollar per X Canadian dollars. For example, if the pair is trading at 1.20 it means that it takes 1.2 Canadian dollars to buy 1 U.S. dollar, or alternatively that 1 CAD is worth $0.833 USD.

Forex pairs with the most pips

Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates have been invited to join as full members from January 2024. Regarding the FX market, there are four main CEE currencies to be aware of. So when paired with the U.S. dollar,  USD/SEK is read “dollar stockie”  and USD/NOK is read “dollar nockie”. This meant that these countries now had one currency, with the same monetary value, with the exception that each of these countries minted its own coins. For those of y’all who are really mesmerized by exotics, here’s a more comprehensive list.

Forex market

All currency pairs are categorized according to the volume that is traded on a daily basis for a pair. USD/CAD is the abbreviation for the U.S. dollar versus Canadian dollar (USD/CAD) currency pair. The quote for the USD/CAD currency pair defines how many Canadian dollars or quote currency are needed to purchase one U.S. dollar, the base currency. Exchange rates fluctuate based on which currency is stronger at certain times. These rates are supplied by global banks and updated in time periods of less than a second; the forex market is extremely fast-paced.

1. Some online forex providers typically quote no more than a fixed 1-point spread between the bid and offer on major forex pairs, and liquid cross rates in normal market conditions.
2. The final two currency pairs are known as commodity currencies because both Canada and Australia are rich in commodities and both countries are affected by their prices.
3. There are many official currencies that are used all over the world, but there are only a handful of currencies that are traded actively in the forex market.
4. The forex market is open 24 hours a day, five days a week (including most holidays), and sees a huge amount of trading volume.
5. The quote for the USD/CAD currency pair defines how many Canadian dollars or quote currency are needed to purchase one U.S. dollar, the base currency.

Don’t confuse minor currency pairs with the seven major currency pairs, all of which include the U. Dollar against one of the seven other most liquid currencies in the world. A currency trader may establish a position where they are simultaneously long the euro and short the dollar. For traders to make a profit, the euro exchange rate must increase. Alternatively, when a forex trader shorts the EUR/USD currency Pepperstone Forex Broker pair, they speculate that the value of the U.S. dollar will rise above the euro.

This floating rate means that the exchange rate continually changes. The currency pairs set the value of one vs. another, and the exchange rates continuously fluctuate based on the respective changing values. There are many official currencies that are used all over the world, but there are only a handful of currencies that are traded actively in the forex market.

The total amount of currency trading involving these 18 pairs represents the majority of the trading volume in the FX market. This manageable number of choices makes trading a lot less complicated compared to dealing with equities, which has thousands of possible choices to choose from. Basically, an exotic currency pair includes one major currency alongside an exotic currency. Exotic currency pairs are made up of one major currency paired with the currency of an emerging economy, such as Brazil, Mexico, Indonesia, Poland, Chile, Turkey, or Hungary.

The major currency pairs tend to have the most liquid markets and trade 24 hours a day Monday through Thursday. The currency markets open on Sunday night and close on Friday at 5 p.m. Currency pairs, which can be found within the foreign exchange market, measure the value of one currency against another.