Forex Point and Figure System Looks at Commodity Currencies

Commodities are all the rage today among traders and investors. The multi-year rallies in crude oil, gold, natural gas, silver, copper, wheat, and other commodities is casting a spotlight on the sector. But did you know that you can play the commodity bull market via the forex market?

The countries that export large quantities of commodities are enjoying tremendous rallies in their currencies. The reasoning for this phenomenon is quite simple. Consider the following scenario.

A refiner in the United States needs some crude oil to turn into gasoline and diesel. This refiner can't find any oil for sale in the United States, so it turns north and looks for a supplier in Canada. It just so happens that a driller in Canada is sitting on hundreds of thousands of barrels of oil that it needs to sell. The U.S. refiner contacts the Canadian driller and arranges for payment and transportation of the crude oil. In order to complete the sale, the U.S. refiner needs to convert his U.S. dollars into Canadian dollars. The transaction is the equivalent of selling U.S. dollars and buying Canadian dollars.

This transaction is taking place in many different forms all across the world as countries that need commodities are buying from countries that produce the commodities. The commodity producing countries are seeing an unprecedented demand for their currencies.

One of the major players in the global commodity boom includes Canada, which is a resource rich country. Canada is a major supplier and producer of fossil fuels, including crude oil and natural gas. Additionally, the country exports a lot of timber, wood pulp, aluminum, and fertilizer.

Another major force in the global commodity boom Is Australia. The country exports a tremendous amount of metals, including gold, iron ore, coal, wheat, and wool. Neighboring New Zealand, although small in terms of GDP and population, is also a major force in the global commodities trade. New Zealand is a major exporter of food products, specifically dairy, meat and fish. New Zealand exports most of its commodities to Australia, the U.S., Japan, and China.

Norway is emerging is a major force in the global commodities boom because of the country's rich oil deposits. Norway exports over 3 million barrels of oil per day, mainly to the U.K., Germany, the Netherlands, France, and Sweden.

With the prices of crude oil, natural gas, and food rising, you can now see how currencies like the Canadian dollar, Australian dollar, New Zealand dollar, and Norwegian krone are strengthening. As the prices of these commodities continue higher, so too will the currencies of the countries that export these commodities. It's due to the simple principles of supply and demand. The demand for the currencies of countries that export commodities increases due to the foreign exchange that must take place in order to trade these commodities.

The trends in commodities and the commodity-related currencies are far from over. You can learn how to identify these trends, and profit from them, right in the forex market. By simply knowing which countries export what commodities, you can join the commodity bull market and profit.