The Loonie, oil currency
The Canadian dollar is nicknamed "Loonie" due to the loon engraved on the 1 Canadian dollar coin. It's a commodity currency whose value is largely determined by oil price — Canada being the world's 4th largest crude producer (4-5 million barrels/day, mainly from Alberta tar sands).
The oil-CAD correlation
USD/CAD is inversely correlated with WTI oil price: when oil rises, CAD strengthens and USD/CAD falls. Historical correlation is -0.7 over the last 20 years, sometimes up to -0.9 during Middle East geopolitical tensions.
Practical consequence: to trade USD/CAD, many pros monitor in parallel WTI Crude Oil (CL=F on platforms) and weekly DOE inventories (Department of Energy US, published Wednesday 10:30 AM ET).
Macro drivers
- WTI and Brent oil price (correlation -0.7 to -0.9)
- Fed vs Bank of Canada differential (BoC): BoC meets 8×/year, like Fed
- Canadian economic data: Employment Report (Friday following US NFP), monthly CPI, quarterly GDP
- OPEC+ sanctions: production decisions by producer countries impact oil thus CAD
- USA-Canada trade policy: USMCA (ex-NAFTA), Trump tariffs (2017-2020 and 2025+ hypotheses) generate 100-200 pip swings
Sessions and spread
USD/CAD is most active during New York session (8 AM - 4 PM ET) as both currencies are North American. Asian session is quiet (2-3 pip spreads). Twin US+Canada economic announcements on Friday (US NFP + Canada Employment Report) often create the week's biggest moves on USD/CAD.
Specificity: the "cycle convergence"
Historically, BoC follows Fed with a 1-3 month lag on rate decisions. When Fed hikes, BoC generally follows. Consequence: USD/CAD moves less violently on rate announcements than EUR/USD or GBP/USD, since both central banks are aligned in their cycle. Real opportunities come when BoC diverges from Fed (rare but explosive).