Currency trading is one of the most volatile and exciting vocations in the economic trading arena. For those who don’t know, currency trading dwarfs the activities of stock market trading many times over every single day. Trillions of dollars in currency trades are undertaken whenever the markets are open, and one of the most popular currency pairs in North America is the USD/CAD currency pair.
If you’re wondering what factors are important when it comes to determining whether you should place call options (buy the USD/CAD pair) or put options (sell the USD/CAD pair), they are pretty much the same for every single currency. This is to say that factors such as the following will play a big part in your decision-making process:
- Interest Rates
- Inflation Rates
- Monetary and Fiscal Policy
- Hawkish or Dovish Policies
- Employment/Unemployment Rates
- GDP Growth Rates (annual, quarterly and monthly)
The aforementioned factors are but a handful of the many considerations that must be factored into your decisions about going long or going short on currency pairs.
Today we will take a look at some of the most important drivers of the USD/CAD currency pair recently and how they will affect the way you trade the pair. Just recently, Canada reported its highest unemployment rate since 2014. Naturally, negative economic data such as this will be bearish for the currency and result in put options been placed on the Canadian dollar. But remember since you’re trading binary options on the pair, you would place call options on the USD/CAD currency pair. Take a look at the following graphic which represents this information.
Unemployment in Alberta in Canada rose to its highest level since 1996. The number that was recorded was -5700, which is surprising given the 24,100 gain in employment in January. Additionally, housing starts were weaker than the consensus forecast by a margin of 20,000. Housing starts and employment are among the most significant drivers of currency strength or weakness, and Canada has sustained two blows to its currency with bearish sentiment on both accounts. Currency traders will now be looking towards the March 9 meeting held by the Bank of Canada where the overall tone is expected to be significantly less bullish when the Governor Steven Poloz offers an official opinion.
