What is the product of product?
Currency trading on commodities is a small part of rather specialized foreign exchange or exchange negotiation, but can offer great potential for the merchant who is interested in the prices of certain goods, in particular oil and gold.
In the exchange markets, “commodity currencies” are country currencies whose main exports are raw materials. As we have just said, the most influential influentials are oil and gold, but other raw materials can include metals other than gold, agricultural products, precious stones, etc.
There are a large number of countries in the world that have of course exports of raw materials, but many of them have minor currencies that most traders would not want to participate. There are only three major basic currencies: the Canadian Dollar CAO, Australian dollar AUD and New Zealand Dollar NZD. All have enough liquidity to make them interesting for forex traders.
As you can expect, the cost of basic products are often closely linked to commodity prices. In the case of Canada, which is the second largest exporter of oil, changes in the price of oil will affect the value of the Canadian dollar. In Australia, the large export of commodities is gold. New Zealand has a broader basket of commodity exports and the New Zealand dollar is therefore not closely linked to a single commodity commodity, but has a correlation with the CRB index, the index General of commodity prices.
All of these currencies can be exchanged with other major currencies, the US dollar for a major pair or other major currency for a transverse pair. However, the influence of the price of commodities is particularly strong if you negotiate a base currency against a country that constitutes a major importer of the goods concerned.
For example, in the USD / CAD pair, you have a country that is strongly dependent on oil imports (USA) and a country that is an important exporter of oil (Canada). It is clear that the price of the price of oil will have a huge impact on this particular pair.
Of course, oil is not the only factor in the economy of these countries and you should also consider other factors such as interest rates and the political situation. But if you have an interest in oil as a commodity, you can apply it to the USD / CAD pair with profitable results.
Another point to keep in mind when you enter the bargaining of foreign exchange on commodities, it is that price changes in commodities unless they are particularly extreme, generally No immediate impact. This means that small fluctuations in the price of oil will not necessarily have no significant effect on USD / CAD. The Forex market will simply absorb short-term changes. These are long-term prospects for the price of basic products more likely to import. The delay here can be helpful because other things being equal, it allows the currency merchant to enter the market at a good time.