How Trade Relations Affect the AUD/USD Currency Pair
The AUD/USD currency pair is influenced by trade relations between Australia and the United States. The two countries have a long-standing economic relationship, and are trusted investment and trading partners. Since the Australia-United States Free Trade Agreement was put into effect in 2005, exports of US goods to Australia have increased by 91%. There are numerous reasons why the two countries share strong economic ties. Here are a few of them.
The AUD/USD pair is currently near a critical Fibonacci support level, as it has retreated from its previous high. It has recently crossed below the middle Bollinger Band line, signaling a bearish trend reversal. The AUD/USD pair is also more volatile during the late US trading hours, which cover the mid-point of the Asia-Pacific session. During such times, key macroeconomic data and central bank policy statements may impact the price. In addition, hedge funds, retail traders, and money-changers are all involved in the AUD/USD market.
Australia’s economy has been on the rise lately, as it has become a major exporter of commodities. As such, the value of the AUD/USD pair is closely linked to the global demand for these commodities. As a result, the currency has become one of the most popular currency pairs in the Forex market, and is the fourth most traded, accounting for 5.2% of all forex trades.
China is a major consumer of Australian exports. If the Chinese economy continues to expand, the Australian dollar will strengthen. Conversely, if China experiences a recession, the AUD/USD may weaken. Another important factor is the Reserve Bank of Australia’s monetary policy statement. The central bank meets eleven times a year, and its minutes are released after two weeks. A hawkish or dovish RBA statement will influence the AUD/USD.
Australia’s economy has grown year after year since 2001. The global financial crisis in 2008 was a stumbling block for the country’s economy. This is why AUD/USD is a highly liquid market, and traders can benefit from short-term trading opportunities. However, remember that the AUD/USD currency pair is heavily affected by commodities. For example, a slowdown in China could result in lower prices for key commodities, which will in turn affect the AUD base rate.
Other important factors affecting the AUD/USD include the economic outlook of Australia, political developments in China, and interest rate influences. In addition, AUD/USD is closely related to USD/CAD, USD/CHF, and USD/JPY, and has a negative correlation with USD/JPY. A positive correlation means that AUDUSD will move together; a negative correlation means the opposite.
Currency correlations can help traders predict where prices will move next. The ‘Big Mac Index’ in the Economist magazine shows how closely Australian dollar prices move with those of other currencies. The Big Mac Index shows that Australian dollar prices move with risk sentiment and speculation. Using this index, you can predict how much you can spend in one currency by predicting where it will go next.
The AUDUSD has been a big loser over the last week. The currency pair has traded at the same pips as the other major currencies in the world, including USD/JPY. However, the USD/JPY was able to trade at higher levels than USD/CHF.