Canadian Dollar futures (6C) at CME Group allow you to trade the value of the Canadian dollar against the U.S. dollar in a liquid and transparent market.
As the sixth-most widely held reserve currency, the Canadian dollar, popularly called the loonie, is one of the most widely traded currencies in the foreign exchange (forex) market.
Though Canada’s GDP ranks 10th in the world, it ranks ninth in the world in terms of dollar-value exports and is an important commodity producer.
The Bank of Canada is known for its lack of intervention in the currency markets which, when coupled with Canada’s fiscal discipline and high interest rates, give the loonie a relative stability that is rare.
Each Canadian Dollar futures contract represents 100,000 Canadian dollars with a minimum price fluctuation of $.00005 per Canadian dollar increment. The contract trades Sunday-Friday from 6 p.m. to 5 p.m. Eastern Time (ET) with a daily 60-minute break at 5 p.m. ET.
Trading the Markets
Market participants trading the CAD/USD with the futures contract should watch for all the traditional factors that impact exchange rates, such as purchasing power and interest rate parity, along with releases of economic data such as GDP, retail sales, inflation data and general daily news.
Predictably, by virtue of geography and tightly intertwined trade, the value of the Canadian dollar can be closely connected to the economic health of the U.S. As the U.S. accounts for more than 50% of Canada’s exports, and vice versa, the currencies can sometimes move in lockstep.
Another important note, 60% of Canada’s exports are commodities, and commodity prices can influence investor sentiment regarding the loonie. Oil’s influence is particularly large; traders tend to buy the loonie when oil is on the rise.
Overall, the Canadian dollar is becoming an increasingly viable alternative to the U.S. dollar and is poised to gain importance in the forex market in years ahead.
Peter Knight Advisor