Forex trading is one of the biggest financial markets and it can be accessed very easily by anyone for 24 hours a day. Forex trading, to say it as simply as possible, is the process of selling one currency, while, at the same time, buying another. 

There are many currency pairs available on the market, and they are mostly divided into three categories. Major currency pairs, cross currency pairs, and exotic currency pairs. The most popular ones for trading are the major currency pairs, which include pairs like USD/EUR, USD/GBP, USD/CAD, etc. 

On the Forex trading market, there are 8 currencies that account for over 80 percent of the whole market, and Canadian Dollar, also known as loonie, is one of these major currencies. Around the world, loonie is known to be the sixth-most held currency as a reserve, which makes it a very important part of the Forex trading market.

Most of this is thanks to the general stability and economic potential of Canada as well as its close proximity to the world’s largest economy. Due to such a reputation in the FX market, many companies have decided to move directly into major Canadian cities like Toronto and Vancouver. However, the most important corporate migrants would be the current Forex brokers in Canada which had previously headquartered in countries such as the United Kingdom or France. Canada is slowly carving itself a nice chunk of the FX market for future investments.

The Investment Industry Organization of Canada (IIROC) is the main regulatory body of the country, making sure that the traders can stay safe and secure while investing in the Forex market. 

How is loonie supported? 

Generally, national currencies around the world are regulated by the national banks of the country. For loonie, it is the Bank of Canada, which makes sure to find a balance between policies which promote employment in the country and guarantees the stability of economic growth.

In 2017, Canada was ranked number 10 when it comes to GDP. In recent years, the economy of the country has grown a lot and managed to create a very balanced and comfortable environment for its local currency. 

One of the biggest reasons why CAD stays to be such an important currency in the world of Forex, is the commodities in the country. Canada represents a very important producer of commodities such as petroleum, minerals, wood products and many others.

The price of the CAD largely depends on the situation in its neighboring country, USA. Because of this, in many cases, CAD traders take their time to check out the events of the USA. Because of the huge trading ties between the two countries, ongoing events in the USA largely influences the trading price of the loonie.

How does CAD work? 

Because of how much Canadian dollar relies on commodities, performance of the currency is largely dependent on the price of oil and other commodities. Also, the price of loonie can also depend on the events in the countries that are very active importers of Canada, such as, China, for example. 

In addition to all these, the inflow of capital can also have a significant impact on the loonie’s price. Generally, when there is a higher price on commodities, the interest on investing in Canadian assets also increases. 

Canada is known as a safe country around the world, because of which, the Canadian Dollar plays a huge role in Forex trading around the world. In addition, the country also enjoys a reputation for balanced fiscal management and this is very important in the period of economic uncertainty. 

Although it is not as much of a reserve currency like the USD, CAD is also considered by many to be a global safe haven. As of today, CAD is known to be sixth most reserve currency, and the holdings are increasing very actively.

Why is CAD so important for Forex trading? 

Among retail traders, CAD pairs are among some favorite pairs, and not for the wrong reason. CAD is a very important currency when it comes to Forex trading, however, there are many things that influence the changes of its price. One of the main things that influence the price of CAD is the United States, because these two countries are very active trading partners. 

Loonie represents one of the leading currencies in the Forex market, and there are many things that influence its price, because of which, it is very much loved by traders around the world. Although Canada is not among the largest exporters around the world, the economy of the country is pretty much stable. The greatest thing about Canada is that the country found a great balance, which makes CAD a very popular part of Forex trading around the world.