As we have seen in previous chapters, the price of the currency is determined by many factors, including economic, political, psychological, and others. All these factors in relation to each country in one way or another affect the rate of its currency - some factors are more and some less so.But in the Forex market, there are currencies, the price of which is almost entirely determined by a single factor - the export of its country. Such currency in the Forex are called commodity currencies (commodity currencies).
Specificity of the commodity currencies is that their country's economy is almost entirely rests on the export of certain types of raw materials - oil, gas, precious metals and agricultural products. Countries that fall under this definition, a lot, but the main ones are Canada, Australia and New Zealand. Since the currency of these countries is the dollar (in each country a), in this context, they are called ForexCommodity Dollars (commodity dollars, comdolls). The fact that the export of raw materials is the determining factor in the health of the economy of these countries, the corresponding increase in raw material prices on the world market results in the growth of the national currency, and vice versa. Therefore, to talk about the correlation (correlation) cost of raw materials on the world market with the price of the commodity currencies.
The Canadian dollar (CAD), the Australian dollar (AUD) and New Zealand dollar (NZD) are included in the major traded currency pairs (major currency pairs) in Forex, so studying their characteristics as commodity currencies is an integral part of successful work in the currency market. Next, we consider each commodity currency separately and give comments on each of them.
Canada is famous for its oil reserves, which by their largest oil reserves second only to Saudi Arabia. Oil is usually called "black gold", which indicates the high demand for this resource in the world. Thus, thanks to its favorable geographical position, Canada is the largest oil exporter in the world. US vice versa, is experiencing a shortage of this resource and is the largest importer. Therefore, changes in oil prices are reflected in the exchange rate of USD / CAD in the reverse proportion. Higher oil prices lead to a drop in USD / CAD (the cheapening of the dollar). Falling oil prices, in contrast, leads to the increase of USD / CAD (dollar appreciation). Therefore, to say about the inverse correlation between the oil price and the exchange rate USD / CAD. Since January 1988, the price of oil and the exchange rate USD / CAD had a 68% inverse correlation - it is a strong link! Knowing this could be a good additional tool in predicting changes in the exchange rate USD / CAD in the Forex market. Below is a graph that can be observed correlation of oil prices and the exchange rate USD / CAD from January 1988 to January 2006.
Australia's economy is heavily dependent on the export of gold jewelry and ornaments, which is more than 50% of the country's total exports. This is due to the gold fields which Australia is endowed with because of its favorable geographical position. The world price of gold and the exchange rate AUD / USD have a greater correlation than the world oil price and the exchange rate USD / CAD. From January 1980 to 2006. currency fluctuations AUD / USD and gold prices were virtually identical, as can be seen in the graph below. Moreover, there was a tendency that the gold rate reversal was preceded by several respective reversal of the exchange rate AUD / USD - stars on the chart marked the turning point of courses that clearly show it. In 2005-2006. correlation changed when gold has risen significantly in price, and the corresponding rise of the Australian dollar (AUD) in relation to the US dollar (USD) was not followed. However, in the long term correlation still exists and can be used as an additional tool to predict Forex. You should know that the world price of gold and foreign currency quotation AUD / USD have a direct correlation.
The New Zealand economy as well as its western neighbor's economy is heavily dependent on exports. But, unlike Australia and Canada in the export of New Zealand there is no predominance of any one type of raw material. The country exports dairy products, meat, fish, wood, wool and others. Because of this diversity sold the country of raw materials to correlate the value of export of goods from the rate of the national currency against the US dollar used by the index of the Bureau for the Study of the commodity markets (Commodity Research Bureau Index , CRB Index). This index is represented by a basket of the world's leading commodity and as an indicator of inflation in the world. The value of CRB Index and the exchange rate NZD / USD has a direct correlation. Below is a graph of the order of 60% of such a correlation is observed from January 1990 to January 2006. As you can see, the exchange rate NZD / USD is heavily dependent on international commodity prices. Knowing this fact can serve as an additional tool in the arsenal of tools for analyzing and forecasting Forex.
Summarizing the chapter should be noted that taking into account the correlation of commodity prices with courses commodity currencies when trading Forex should be only in the medium and long term. We should not forget that exports - is only part of the economy. In deciding to open or close positions on commodity currencies Forex must take into account other influencing factors such as the economy, such as the refinancing rate,the political situation in the country, etc.
Specificity of the commodity currencies is that their country's economy is almost entirely rests on the export of certain types of raw materials - oil, gas, precious metals and agricultural products. Countries that fall under this definition, a lot, but the main ones are Canada, Australia and New Zealand. Since the currency of these countries is the dollar (in each country a), in this context, they are called ForexCommodity Dollars (commodity dollars, comdolls). The fact that the export of raw materials is the determining factor in the health of the economy of these countries, the corresponding increase in raw material prices on the world market results in the growth of the national currency, and vice versa. Therefore, to talk about the correlation (correlation) cost of raw materials on the world market with the price of the commodity currencies.
The Canadian dollar (CAD), the Australian dollar (AUD) and New Zealand dollar (NZD) are included in the major traded currency pairs (major currency pairs) in Forex, so studying their characteristics as commodity currencies is an integral part of successful work in the currency market. Next, we consider each commodity currency separately and give comments on each of them.
Canada is famous for its oil reserves, which by their largest oil reserves second only to Saudi Arabia. Oil is usually called "black gold", which indicates the high demand for this resource in the world. Thus, thanks to its favorable geographical position, Canada is the largest oil exporter in the world. US vice versa, is experiencing a shortage of this resource and is the largest importer. Therefore, changes in oil prices are reflected in the exchange rate of USD / CAD in the reverse proportion. Higher oil prices lead to a drop in USD / CAD (the cheapening of the dollar). Falling oil prices, in contrast, leads to the increase of USD / CAD (dollar appreciation). Therefore, to say about the inverse correlation between the oil price and the exchange rate USD / CAD. Since January 1988, the price of oil and the exchange rate USD / CAD had a 68% inverse correlation - it is a strong link! Knowing this could be a good additional tool in predicting changes in the exchange rate USD / CAD in the Forex market. Below is a graph that can be observed correlation of oil prices and the exchange rate USD / CAD from January 1988 to January 2006.
Australia's economy is heavily dependent on the export of gold jewelry and ornaments, which is more than 50% of the country's total exports. This is due to the gold fields which Australia is endowed with because of its favorable geographical position. The world price of gold and the exchange rate AUD / USD have a greater correlation than the world oil price and the exchange rate USD / CAD. From January 1980 to 2006. currency fluctuations AUD / USD and gold prices were virtually identical, as can be seen in the graph below. Moreover, there was a tendency that the gold rate reversal was preceded by several respective reversal of the exchange rate AUD / USD - stars on the chart marked the turning point of courses that clearly show it. In 2005-2006. correlation changed when gold has risen significantly in price, and the corresponding rise of the Australian dollar (AUD) in relation to the US dollar (USD) was not followed. However, in the long term correlation still exists and can be used as an additional tool to predict Forex. You should know that the world price of gold and foreign currency quotation AUD / USD have a direct correlation.
The New Zealand economy as well as its western neighbor's economy is heavily dependent on exports. But, unlike Australia and Canada in the export of New Zealand there is no predominance of any one type of raw material. The country exports dairy products, meat, fish, wood, wool and others. Because of this diversity sold the country of raw materials to correlate the value of export of goods from the rate of the national currency against the US dollar used by the index of the Bureau for the Study of the commodity markets (Commodity Research Bureau Index , CRB Index). This index is represented by a basket of the world's leading commodity and as an indicator of inflation in the world. The value of CRB Index and the exchange rate NZD / USD has a direct correlation. Below is a graph of the order of 60% of such a correlation is observed from January 1990 to January 2006. As you can see, the exchange rate NZD / USD is heavily dependent on international commodity prices. Knowing this fact can serve as an additional tool in the arsenal of tools for analyzing and forecasting Forex.
Summarizing the chapter should be noted that taking into account the correlation of commodity prices with courses commodity currencies when trading Forex should be only in the medium and long term. We should not forget that exports - is only part of the economy. In deciding to open or close positions on commodity currencies Forex must take into account other influencing factors such as the economy, such as the refinancing rate,the political situation in the country, etc.
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