Oil 🛢️ is not just a commodity; it is the lifeblood flowing through the arteries of the global economy. For decades, it has held the power to move financial markets, earning its place as a true leader of global market sentiment. Wherever oil moves, markets rarely stay silent.

But oil’s influence goes far beyond the commodities market. In the Forex market, oil acts as a powerful fundamental driver, shaping the direction of certain currency pairs—especially those tied to oil-dependent economies. One of the clearest examples is USD/CAD 💱.

Canada 🇨🇦 is one of the largest oil producers in the world, exporting approximately 2 million barrels of oil per day to the United States 🇺🇸. This massive flow of exports has made Canada the largest foreign supplier of oil to the U.S.
As a result, strong U.S. demand for Canadian oil creates significant demand for the Canadian dollar (CAD)—a key factor that can dramatically influence price movements in the USD/CAD currency pair 📈📉

It is also important to note that Canada’s economy is heavily export-driven, with nearly 85% of its total exports flowing to its southern neighbor, the United States 🇺🇸. For this reason, the USD/CAD currency pair is highly sensitive to how the U.S. economy—and American companies in particular—react to changes in oil prices.

When U.S. companies seek to increase production, their demand for energy rises. This leads to higher oil imports from Canada 🇨🇦, boosting oil prices and strengthening the Canadian dollar. As a result, the USD/CAD exchange rate tends to decline 📉.

On the other hand, when American companies show less appetite for expanding production, U.S. oil imports decrease. In this scenario, demand for Canadian oil—and consequently for the Canadian dollar (CAD)—falls. This reduction in demand often leads to a rise in the USD/CAD exchange rate 📈

📝 About the Research

This analysis was conducted by Researcher Mohammad Mahdi Nesaj Zadeh within the framework of the Global Financial Markets Research Institute and Quantitative Modeling Lab. Our research focuses on examining the complex relationships between oil and the USD/CAD currency pair using quantitative models, advanced statistical analysis, and market simulations.

The aim of this study is to provide a scientific and analytical perspective on the fluctuations of this currency pair, demonstrating how global economic flows and commodity market data can shape currency movements. This research is purely data-driven and does not constitute any investment advice.