USD/CAD and Oil Prices: Trading the Correlation
Katy Spark
Dec 15, 2025
Canada is one of the world's largest oil producers, making the Canadian Dollar highly sensitive to crude oil prices. This relationship creates trading opportunities for those who understand the correlation.
The Oil-CAD Relationship
When oil prices rise:
- Canada's export revenues increase
- CAD typically strengthens
- USD/CAD tends to fall
When oil prices fall:
- Canada's economy faces headwinds
- CAD typically weakens
- USD/CAD tends to rise
Correlation Statistics
The correlation between oil prices and USD/CAD typically ranges from -0.6 to -0.9, meaning they move in opposite directions most of the time. However, correlations can break down during unusual market conditions.
Trading Strategies
Correlation Confirmation
Before entering a USD/CAD trade, check if oil is supporting your thesis. A bearish USD/CAD setup is stronger if oil is breaking higher.
Divergence Trading
When USD/CAD and oil diverge (both moving the same direction), look for the relationship to normalize. This often presents opportunities.
Key Oil Reports to Watch
- Weekly EIA crude inventory data (Wednesdays)
- OPEC meetings and production decisions
- Baker Hughes rig count (Fridays)
Katy Spark
Content Writer at PulseMarkets
Expert in forex trading, market analysis, and financial API integration. Helping traders and developers make better decisions with data.