In the world of forex trading, most beginners start by looking at major pairs like EUR/USD or GBP/USD. But if you are planning to move one step beyond and want to understand the bigger picture of global markets, one powerful concept you must not forget.
Did you get what we are talking about?
Well, commodity currencies in forex.
Global commodity prices directly influence these currencies, and understanding them gives traders an edge in predicting movements, managing risk, and uncovering new opportunities.
Let’s break it down!
What are commodity currencies?
Commodity currencies are national currencies that move in correlation with the price of specific raw materials or natural resources. These economies rely heavily on commodity exports, so when the prices of these commodities fluctuate, their currencies often move in the same direction.
The most traded commodity currencies in the forex market are:
- Canadian Dollar (CAD): Linked to crude oil.
- Australian Dollar (AUD): Tied to gold, iron ore and coal.
- New Zealand Dollar (NZD): Influenced by dairy and agricultural goods.
- Russian Ruble (RUB): Closely connected to oil and natural gas.
- Norwegian Krone (NOK): Also oil dependent.
These currencies tend to move in predictable patterns when commodity prices rise or fall.
Why do commodity currencies matter in forex?
When trading major pairs, you are primarily responding to inflation, employment data, and central bank movements. However, adding commodity currencies to your portfolio also allows you to access global resource flows, supply chains, and demand.
Here are some of the reasons which make commodity currencies in forex powerful:
- More general market insight: Commodity currencies respond quickly to changes in international trade and the state of the economy.
- Volatility equals opportunity: Sharp moves in oil or gold create quick trade setups.
- Diversification: These pairs behave differently from majors, helping balance your strategy.
- More predictable trends: When oil is bullish, CAD often follows— it gives an edge to traders who track commodities.
Let’s understand this with a real-life example: Oil and the Canadian Dollar.
Suppose a geopolitical event causes an unexpected spike in oil prices. Canada’s economy benefits from being a significant oil exporter, and the CAD also benefits. This frequently results in a stronger Canadian dollar, particularly when compared to other currencies like the USD or JPY.
Therefore, if you’re keeping an eye on the USD/CAD pair and notice that oil is rising, you may predict that CAD will strengthen and modify your trades accordingly.
How to trade commodity currency wisely?
Commodity currencies in forex offer excellent trading opportunities, but they require a slightly different approach than typical forex pairs.
- Follow the commodities:
- Crude oil for CAD and NOK
- Gold for AUD
- Dairy index for NZD
- Track global news:
Events like OPEC meetings, climate issues or economic sanctions can move these currencies fast.
- Use correlation tools:
Some brokers and platforms (like XtremeMarkets) provide tools to analyze correlation strength between a currency and a commodity. Use these insights to redefine strategy.
- Watch for double exposure:
Avoid trading both AUD/USD and gold if your entire setup depends on one moving in a specific direction—you’re doubling your risk.
Popular commodity currency pairs to watch
- USD/CAD – Trades oil price movement indirectly
- AUD/USD – Moves with gold and Chinese demand
- NZD/USD – Impacted by global dairy and agriculture prices
- NOK/JPY – Volatile and oil-sensitive, popular among pros
- AUD/NZD – Tracks commodity-driven economic differences between Australia and New Zealand
How XtremeMarkets help you trade smarter?
At XtremeMarkets, we know traders need more than just access to charts—they need insights and fast execution.
That’s why we provide:
- Real-time commodity price feeds
- Copy trading tools that let you follow top commodity currency traders
- PAMM options to invest in managers focused on CAD, AUD, NZD
- Ultra-fast ECN spreads for major and commodity pairs
Whether you’re trading oil-sensitive currencies or diversifying your forex strategy, our platform equips you to make confident moves in volatile conditions.
Final words
Commodity currencies in forex offer insight into the intersection of foreign exchange trading and global economics. You can get an advantage that many traders overlook by knowing how resources like gold, oil, and agricultural products affect currency strength.
Seeing the wider picture is more important than focusing solely on charts and candles.
To advance your forex skills to a global level, it might be time to add some CAD, AUD, or NZD to your watchlist if you have only been trading the majors.
Are you ready to trade smarter? Join XtremeMarkets now!
