Forex Credit

There are three nations of signification in the forex market whose economy is closely tied up with commodities. These are Canada, the planet’s second largest exporter of oil; Australia, a major gold producer; and New Zealand, with a bigger basket of commodity exports. With Canada being an exporter of oil and the United States being a large importer, a go down or up in the cost of oil is probably going to affect this pair directly. It would be funny to be trading USD/CAD without taking any notice of oil costs. NZD pairs, however, are way more complex because of the sundry range of products that New Zealand exports. The general commodity price index is the one to observe here.

Naturally, even where there’s a powerful industrial link to a selected commodity, the effect on currency costs is not always direct. Small changes in commodity prices are often ignored by the market. The effect is more obvious when there is a massive go up or down or, indeed, a prophecy of a major change in the cost of the commodity.

Often, the currency price will not react right away. This creates the ultimate situation for a currency exchange trader with an interest in the commodity market. By identifying a trend in the price of oil, as an example, traders can regularly enter the USD/CAD market before a reactive trend forming in the cost of the currency pair.