Let’s Talk About the Other Kind of Gold… the Black One
You’ve probably heard crude oil called “black gold.” Here at BabyPips.com, we like to have a little fun and call it “black crack”—because just like the real stuff, the global economy can’t seem to function without it.
Oil is one of the world’s most vital energy sources, fueling industries, transportation, and just about everything else that keeps the modern world running.
How Oil Impacts USD/CAD
Canada is one of the world’s top oil producers, exporting over 3 million barrels per day—mostly to the United States. In fact, Canada is the largest supplier of oil to the U.S., making it America’s number one “black crack” dealer.
Because of this close relationship, demand for oil directly influences demand for the Canadian dollar (CAD). Here's why that matters:
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Canada’s economy is heavily export-driven, with about 85% of its exports going to the U.S.
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Oil makes up a huge portion of those exports.
So when oil prices shift, it can cause big ripples in the USD/CAD currency pair.
The Oil–USD/CAD Relationship
Here’s how it typically works:
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If oil prices rise, U.S. companies need more CAD to buy Canadian oil, so demand for the CAD increases. This usually causes USD/CAD to fall.
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If oil prices fall, demand for Canadian oil drops, weakening the CAD—and USD/CAD tends to rise.
Between 2000 and 2016, oil and USD/CAD had a strong inverse correlation of about 93%. That means they moved in opposite directions almost all the time.
To visualize this, traders sometimes invert the USD/CAD chart—which makes the relationship with crude oil prices more obvious. When oil goes up, the inverted USD/CAD chart often moves in sync.
What This Means for Traders
So the next time you’re filling up your car and notice gas prices rising, it might be a sign that oil is gaining strength—and that could be your clue to look for a short opportunity in USD/CAD.
Many forex brokers offer commodities like oil and gold alongside currencies, so you can easily compare charts and spot correlations on their platforms.
For quick updates:
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Check gold prices on Yahoo! Finance.
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Track oil prices on Bloomberg.