There are three states of significance in the currency market whose economy is closely tied up with commodities. These are Canada, the planet’s second biggest exporter of oil; Australia, a major gold producer; and New Zealand, with a larger basket of commodity exports. Any of these currencies would be appropriate for commodity currency trading systems. With Canada being an exporter of oil and the usa being a large importer, a go up or go down in the price of oil is likely to affect this pair directly. It would be silly to be trading USD/CAD without taking any notice of oil costs. In the same way, traders concerned with the Australian greenback must be aware about the possible impact of changes in the value of gold. NZD pairs, however, are far more complicated thanks to the varied range of goods that New Zealand exports. The general commodity price index is the one to observe here.
Of course, even where there’s a powerful business link to a specific commodity, the effect on currency costs is not necessarily direct. Other things also have an effect on the foreign exchange market. Little changes in commodity costs are frequently ignored by the market. 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, for instance, traders can often enter the USD/CAD market before a reactive trend forming in the price of the currency pair. This is where commodity foreign exchange trading can give traders an exceedingly valuable edge.
