There are 3 countries of importance 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 bigger 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 States being a big importer, a rise or fall in the cost of oil is likely to affect this pair directly. It’d be silly to be trading USD/CAD without taking any notice of oil costs. In the same way, traders concerned with the Australian buck have to be privy to the possible impact of changes in the value of gold. The general commodity price index is the one to watch here. Other considerations also have an effect on the currency market. Tiny changes in commodity prices are frequently ignored by the market. The effect is more conspicuous when there’s a large go down or up or, indeed, a prophecy of a major change in the cost of the commodity.
Regularly the currency price will not react straight away. This creates a perfect situation for a forex 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 ahead of a reactive trend forming in the price of the currency pair.