How you can profit from the powerful downward trend in commodity currencies

by , 10 September 2015

Commodity currencies are the currencies of countries which have a heavy reliance on commodities. This could be raw materials or natural resources they export.

The South African rand is a commodity currency, with the SA economy relying heavily on the export of its mined resources.

Commodity currencies have been under immense pressure.

So what are the world's major commodity currencies? And are there any trading opportunities with these currencies?

Let's take a closer look…


The world’s major commodity currencies


The major commodity currencies include:

  • The Canadian dollar, heavily reliant on oil;
  • The Norwegian kroon, also heavily reliant on oil;
  • The Australian dollar, heavily reliant on iron ore; and
  • The New Zealand dollar, heavily reliant on dairy produce.

To give you an idea of the powerful downward trend in these currencies is, consider their losses against the US dollar over the past year, Frank Hemsley in Profit Watch explains…

  • The Canadian dollar is down 17%;
  • The Australian dollar is down 24%; and
  • The New Zealand dollar is down 23%.

It’s clear to see the relationship between the price of commodities and the depreciation in these currencies.

For instance, the Canadian dollar has suffered since the oil price plunged. The Australian dollar is under pressure as China’s consumption of iron ore and other commodities falls. And the New Zealand dollar is under pressure as its dairy exports ebb.

The result is these commodity currencies are in powerful downtrends against the dollar.


An opportunity to play the commodity currencies against the dollar


If you haven’t already taken advantage of these sustained downward trends, they’re worth looking at.

While no-one knows when commodity prices will start to recover, with the fundamentals currently stacked up against these currencies, there’s a good chance these trends will continue.

If you want to short one of the commodity currencies against the dollar, ensure you find the right entry points and manage your risk.

Their demise could mean ample profits for you.

So there you have it. How you can profit from the powerful downward trend in commodity currencies.

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