How to Trade the AUDUSD Currency Pair
The AUDUSD, or Australian Dollar/US Dollar, currency pair is one of the most popular pairs among Forex traders. Its high liquidity allows for ease of trading, minimal slippage and lower costs compared to lesser traded currencies.
The AUD/USD rate is influenced by a variety of factors, including trading relations between Australia and Asia, as well as commodity prices. It also takes into account interest-rate differentials between the two countries.
Trade-relations
The AUD is a currency that is closely tied to commodity prices. As one of the world’s largest exporters, Australia is directly impacted by the price of its raw materials.
Australia is also a major importer of Chinese goods, and so China’s economic performance has a significant impact on AUD/USD. Strong growth figures tend to support the currency, while weak ones may lead to a decline in value.
Another factor that can influence the AUDUSD is the interest rate differential between Australia and the US. The Reserve Bank of Australia sets its interest rate every month, while the US Federal Reserve reviews rates eight times a year.
This monetary policy difference can make the Australian dollar more attractive to investors, while it can weaken the US dollar. However, this divergence is expected to narrow in the mid and long term.
Commodity prices
The AUDUSD is a major forex pair that is highly correlated to commodity prices. These are the prices of raw materials, such as iron ore and coal. Australia is among the world’s leading exporters of these materials, so the value of its currency is closely tied to those prices.
The Australian economy has benefited from a strong commodity cycle in recent years. It has seen its currency rise from a low of 0.4855 in 2001 to a high of 1.0967 today.
However, since then, the price of commodities has plummeted, and the Australian dollar has suffered a significant drop in value. The AUDUSD has traded between 0.8300 and 0.6500 since 2015.
Commodity prices are driven by global demand for raw materials, including oil, gold, iron ore, and wheat. While these commodities have been trending higher in recent months, they remain vulnerable to the risks of global growth and geopolitical instability.
ABS data
The Australian dollar (AUD) is one of the world’s most traded currencies. Traders are interested in it because of its geology, geography and government policy that provides an abundance of valuable commodities to sell for international currency.
Australia’s largest trading partner is China, where a third of its exports go. The Chinese economy’s expansion and slowdown will have a direct impact on the value of the AUD.
Another important determinant of the AUD’s value is the Consumer Price Index (CPI), which is released by the ABS every quarter. The CPI measure is closely watched by the Reserve Bank of Australia (RBA), as it has major monetary policy implications.
It is also important to monitor the RBA’s statements, as hawkish statements will tend to strengthen the AUD, while dovish comments will be negative and could pressure the currency lower. The RBA meets eleven times a year, and the minutes of those meetings are published after two weeks.
Interest rates
The AUD/USD pair is a currency pairing that tells you how many US dollars (the quote currency) are needed to buy one Australian dollar (the base currency).
The Australian dollar is a major exporter of commodities like gold, iron ore and coal, so its value is strongly correlated with global spot commodity prices. Its value also depends on the trade-relations between Australia and China, a large trading partner for the country.
As a result, the Aussie’s interest rate policy has been among the most restrictive of industrialized countries. The AUD/USD exchange rate has retreated from fresh yearly lows in September, but may face some headwinds as the Federal Reserve’s monetary policy decisions keep its value under pressure.
The AUD/USD pair is expected to react to the release of the latest GDP data and trade numbers from Australia this week. It will also be affected by the US non-farm payrolls report. The RBA’s monetary policy statement will be released later in the week, and may influence the Aussie dollar’s performance.