Lesson 5 of 12 · 10 min
The commodity pairs: AUD, NZD and CAD
AUD/USD, NZD/USD and USD/CAD lean on what their countries export and on global risk mood. Learn which way each pair tends to move, why USD/CAD reads upside down, and when the commodity link breaks.
By the end you'll be able to
- Name the export, main customer and risk-mood behaviour behind AUD, NZD and CAD
- Say which way USD/CAD tends to move when oil rises and convert its pip value into dollars
- Spot when a central bank, risk mood or the US dollar overrides the commodity, and use it as context
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Oil jumps overnight, so you buy USD/CAD to ride a stronger Canadian dollar. By lunchtime your stop is hit, and you were right about the Canadian dollar.
Three currencies, three exports
, left scale, right scale
The gap is the distance between the two lines as drawn, in right-scale points. It opens in the decoupled phase and does not close when the link returns: moving together again means moving in step, not catching up.
Correlation of daily moves in each phase (simulated: +1 = always together, 0 = no link)
What links them. Crude oil is Canada’s largest export, and almost all of it goes to the United States. When oil rises, each barrel earns more, Canada’s terms of trade (export prices compared with import prices) improve and the Canadian dollar tends to strengthen. On the real quote that shows up as a falling USD/CAD, so this chart plots CAD strength (1 ÷ USD/CAD) to make the link read the right way up.
Why the link breaks. In the shaded phase the Bank of Canada surprises with a rate cut. Oil keeps rising, but lower rates mean investors earn less on every Canadian dollar, so CAD weakens. A risk-off scare or a broad US dollar rally can do the same: USD/CAD is also a US dollar price, and it can rise whatever oil is doing.
What links them. Iron ore is Australia’s largest export, most of it shipped to China to make steel. Higher prices lift export income and the terms of trade (export prices compared with import prices), and the Australian dollar tends to rise with them, so AUD/USD and iron ore often move the same way.
Why the link breaks. In the shaded phase a risk-off scare hits markets. Investors sell the Aussie as a risk-sensitive currency and buy the US dollar as a safe haven, while iron ore holds up on steady Chinese demand. A surprise from the Reserve Bank of Australia, or a broad US dollar move, can break the link in the same way.
What links them. Dairy is New Zealand’s largest goods export, much of it sold to China at auctions held twice a month. Higher dairy prices lift farm incomes and the terms of trade (export prices compared with import prices), and the New Zealand dollar tends to follow.
Why the link breaks. In the shaded phase the Reserve Bank of New Zealand turns dovish and signals lower rates. Dairy keeps firming, but the kiwi falls because the rate story changes what investors earn on it. Risk mood and the US dollar side matter too: in a panic NZD/USD can fall from both ends at once.
Use the commodity as context, not as a signal. A commodity that agrees with your setup is a reason to trust it a little more, never a reason to risk more than your plan allows. Check the central bank, the risk mood and the US dollar first.
Simulated prices, not real data. The Australian dollar and iron ore move together, separate in the shaded phase when a risk-off scare takes over, then move together again. Tap the other pairs to compare.
A commodity currency belongs to a country that earns much of its income selling raw materials. Three of them trade as major currency pairs against the US dollar:
- AUD/USD, the Aussie: iron ore and other metals, mostly shipped to China. Chinese demand matters as much as the price.
- NZD/USD, the kiwi: dairy, priced at auctions roughly every two weeks, with China again the biggest customer.
- USD/CAD, the loonie: crude oil, almost all of it sold to the United States.
When export prices rise, each shipment pays for more imports, the country earns more and its currency tends to strengthen. All three are also risk-on currencies. They tend to rise when investors feel confident and fall fast in a scare, when money runs to the US dollar as a safe haven.
USD/CAD is quoted the other way round
AUD/USDAussie
A liquid way to read China, commodities and global growth: it tends to rise with confidence and fall fast with fear.
LiquidityDeep
A liquid major, heavily traded for its size
Typical volatilityAbove average
Often 40–80 pips
Typical spread (shorter bar = cheaper)Tight
Usually tight; often a touch wider than EUR/USD
Sensitivity to risk moodVery high
Tends to rise on calm days and fall fast in a panic
When it moves (UK time)
Most active in Asia-Pacific hours (about 22:00–07:00), the London open and the London–New York overlap (about 13:00–17:00). Illustrative UK times; Asian-session hours shift by about an hour with daylight saving.
Main drivers
USD/CADLoonie
A North American pair loosely tied to oil: quiet in Asian hours and busiest when US and Canadian data land at 13:30 UK time.
LiquidityDeep
Deep, especially in North American hours
Typical volatilityModerate
Often 50–90 pips
Typical spread (shorter bar = cheaper)Tight
Tight in North American hours; a little wider than EUR/USD
Sensitivity to risk moodModerate
Risk-off tends to lift it: oil falls and the dollar is bought
When it moves (UK time)
Most active in the North American morning (about 13:00–17:00), staying livelier than European pairs into the evening. Illustrative UK times; Asian-session hours shift by about an hour with daylight saving.
Main drivers
NZD/USDKiwi
A smaller, carry-sensitive commodity currency whose own news lands overnight for UK traders and which often shadows the Aussie.
LiquidityGood
Liquid in busy hours, thinner than the big majors
Typical volatilityAbove average
Often 40–70 pips
Typical spread (shorter bar = cheaper)Moderate
A little wider than EUR/USD; widens more when quiet
Sensitivity to risk moodVery high
Carry money arrives in calm markets and leaves fast in a panic
When it moves (UK time)
Most active in the Asia-Pacific window (about 20:00–03:00) for New Zealand news, and the London–New York overlap (about 13:00–17:00) for US data. Illustrative UK times; Asian-session hours shift by about an hour with daylight saving.
Main drivers
Typical behaviour of the three commodity pairs, not a forecast. Check the base and quote line on each card: only USD/CAD puts the commodity currency second. Figures are illustrative.
On AUD/USD and NZD/USD the commodity currency is the base currency, so a stronger Aussie or kiwi pushes the price up. USD/CAD is the other way round. The US dollar is the base and CAD is the quote currency: the price is how many Canadian dollars one US dollar buys. A stronger CAD means fewer of them, so the price falls.
As a rule, oil up tends to mean USD/CAD down.
The quote side also sets the pip value. On AUD/USD and NZD/USD a pip on one standard lot is a fixed $10. On USD/CAD it is CAD 10, about $7.35 at 1.3600, and it shifts with the price.
When the link breaks
The link is real but loose. Look at the shaded phase in the chart above: the commodity kept going while the currency turned. Three things override it most often.
- The central bank. A rate story changes what investors earn on every unit of the currency. If the Reserve Bank of Australia turns dovish, AUD can fall while iron ore rises.
- Risk mood. In a scare, AUD, NZD and CAD tend to be sold and the dollar bought, whatever the commodity is doing.
- The US dollar side. Each pair is also a dollar price. A big US jobs surprise can move all three in a way no commodity explains.
So treat the commodity as context, not a signal. Agreement is a reason to trust your setup a little more, never to risk more. Disagreement is a reason to ask what you are missing, or to trade smaller.
What would you do?
You are long 0.10 lots of AUD/USD at 0.6600 on a $3,000 account, risking 1% ($30) with a stop 30 pips below at 0.6570. Each pip is $1. Iron ore has risen three days in a row. Then the RBA signals rate cuts sooner than expected: AUD/USD drops to 0.6585 while iron ore keeps climbing.
Try it
, left scale, right scale
The gap is the distance between the two lines as drawn, in right-scale points. It opens in the decoupled phase and does not close when the link returns: moving together again means moving in step, not catching up.
Correlation of daily moves in each phase (simulated: +1 = always together, 0 = no link)
What links them. Crude oil is Canada’s largest export, and almost all of it goes to the United States. When oil rises, each barrel earns more, Canada’s terms of trade (export prices compared with import prices) improve and the Canadian dollar tends to strengthen. On the real quote that shows up as a falling USD/CAD, so this chart plots CAD strength (1 ÷ USD/CAD) to make the link read the right way up.
Why the link breaks. In the shaded phase the Bank of Canada surprises with a rate cut. Oil keeps rising, but lower rates mean investors earn less on every Canadian dollar, so CAD weakens. A risk-off scare or a broad US dollar rally can do the same: USD/CAD is also a US dollar price, and it can rise whatever oil is doing.
What links them. Iron ore is Australia’s largest export, most of it shipped to China to make steel. Higher prices lift export income and the terms of trade (export prices compared with import prices), and the Australian dollar tends to rise with them, so AUD/USD and iron ore often move the same way.
Why the link breaks. In the shaded phase a risk-off scare hits markets. Investors sell the Aussie as a risk-sensitive currency and buy the US dollar as a safe haven, while iron ore holds up on steady Chinese demand. A surprise from the Reserve Bank of Australia, or a broad US dollar move, can break the link in the same way.
What links them. Dairy is New Zealand’s largest goods export, much of it sold to China at auctions held twice a month. Higher dairy prices lift farm incomes and the terms of trade (export prices compared with import prices), and the New Zealand dollar tends to follow.
Why the link breaks. In the shaded phase the Reserve Bank of New Zealand turns dovish and signals lower rates. Dairy keeps firming, but the kiwi falls because the rate story changes what investors earn on it. Risk mood and the US dollar side matter too: in a panic NZD/USD can fall from both ends at once.
Use the commodity as context, not as a signal. A commodity that agrees with your setup is a reason to trust it a little more, never a reason to risk more than your plan allows. Check the central bank, the risk mood and the US dollar first.
Simulated prices, not real data. The CAD line is plotted as 1 ÷ USD/CAD so that it rises when the Canadian dollar strengthens; on a real USD/CAD chart it would fall.
Tap Show the gap, then switch between the three pairs and compare the correlation boxes under the chart.
Notice how, on every pair, the gap opens in the shaded phase and the simulated correlation drops from about +0.8 to about +0.1: that is when a trader using the commodity as a signal gets hurt.
Quick check
Quick check
Question 1 of 4
Oil rises sharply and the Canadian dollar strengthens. What does USD/CAD tend to do?
Question 2 of 4
Iron ore keeps climbing, but the RBA signals rate cuts sooner than expected. What is more likely to lead AUD/USD?
Question 3 of 4
You hold 0.10 lots of USD/CAD, so each pip is CAD 1. A 100-pip move ends at 1.3500. Roughly what is it worth in US dollars?
Question 4 of 4
A sudden risk-off scare hits markets. What do the three commodity pairs tend to do?
Go deeper: Commodity currencies: how oil and metals drive CAD and AUD · AUD/USD trading guide · USD/CAD trading guide