How to Trade the AUD/USD Currency Pair
The AUD/USD currency pair is heavily affected by trade relations and interest rates. Interest rates in Australia are relatively high, and can make the Australian currency more attractive. In contrast, rising interest rates in the United States can have the opposite effect and make the AUD/USD less attractive. A number of factors can impact the AUD/USD’s value, including political announcements, new policies, wars, and terrorist incidents.
The most volatile timeframes for trading the AUD/USD currency pair include 00:00 to 02:00 GMT and 06:00 to 08:00 GMT. During these times, volatility is usually highest, and volume is highest. Depending on your trading style, you can take advantage of these times. Some traders will use simple daily or historical price charts to predict price movements, while others will use breaking news to determine trends. Breaking news releases can cause market sentiment to quickly change, so identifying the trend before it happens is vital to making a profit.
When trading the AUD/USD currency pair, it is important to use technical analysis and consider underlying economic forces. You should also consider currency correlations. The AUD/USD is closely tied to NZDUSD, EURUSD, and USDCAD. Positive correlations mean that the pair will move in similar direction, while negative correlations mean that price will move in opposite directions.
The AUD/USD currency pair is among the most traded. It represents over five percent of the fx market and often has high volume and volatility. In trading the AUD/USD, you can use a contract for difference (CFD) or buy/sell currencies. The AUD/USD pair is popular among forex traders because of its popularity in Australia after the early 2000s.
While there are other factors that impact the AUD/USD currency, the most important is the US economy. The US economy has numerous strengths and weaknesses and a variety of economic data that will impact the AUD/USD. Among the most prominent economic indicators are the Trade Balance, Consumer Price Index, and the Producer Price Index. These data are important for technical analysis of the AUD/USD currency pair. It is also important to consider the Federal Open Market Committee’s meetings and forecasts.
Another important factor that influences the AUD/USD currency pair is the US-Australia trade relationship. The US and Australia have very strong economic relations and are each others’ trusted trade partners. Their free trade agreement was signed in 2005 and has resulted in an increase in US exports to Australia of over nine percent since its ratification. The Australian economy depends heavily on the price of commodities like coal and iron ore. This means that a strong economic relationship with the US is beneficial for AUD/USD traders.
The Australian dollar is a risk-linked currency, which means that it reacts a lot to overall market sentiment. It tends to rise when global conditions are positive, and falls when global headwinds are present. As a result, AUDUSD’s value can fluctuate significantly based on the price of Australia’s major commodity exports.
Interest rate differentials between the two currencies are also important to consider. For instance, when the Fed intervenes in the market, the U.S. dollar may weaken because of increased supply. In turn, this will cause the Australian dollar to hold its value, and the relative value of the pair will increase.
The AUDUSD currency pair is one of the most popular pairs in the forex market. Its value is measured by the number of US dollars needed to buy one Australian dollar. As such, the AUD/USD pair is heavily affected by commodity prices and market risk sentiment. For instance, a weak Australian dollar can result in a strong US dollar.
While the US dollar and Australian dollar are closely linked, there are many factors that affect the value of AUDUSD. Investors usually favor the US dollar in periods of economic uncertainty, while those in Australia tend to track equities. The Australian dollar was riding the gold wave when the 2008 financial crisis began, but as equities started to fall, the currency began to capitulate.