Introduction
Among the currency pairs to be dealt with on Forex the most interesting for individuals is the AUD/USD pair which occupies an important place. In fact, this currency pair has the distinction of being easily analyzed by studying different very precise indicators. To learn more about how to analyze this equality and the indexes to follow to predict trends, here are some practical explanations and some tips to follow.
What is the AUD/USD?
The AUD/USD is called the exchange rate between the Australian Dollar and the US Dollar which is given in number of US Dollars for one Australian Dollar. Its quotation therefore corresponds to the value of the Australian dollar in US dollars. The AUD/USD still represents more than 6% of all foreign exchange transactions. AUD/USD is the 4th most traded currency pair in the world after the EUR/USD, USD/JPY and GBP/USD. Generally, in the world of financial investment, the AUD/USD pair is called “Aussie”. To understand its movements and its evolution, it is enough for you to know the factors that influence the quotation of each of these two currencies. This currency pair is heavily impacted by commodity prices.
What Are the Indicators to Follow to Analyze The AUD/USD?
The AUD/USD is called the exchange rate between the Australian Dollar and the US Dollar which is given in number of US Dollars for one Australian Dollar. Its quotation therefore corresponds to the value of the Australian dollar in US dollars. The AUD/USD still represents more than 6% of all foreign exchange transactions. AUD/USD is the 4th most traded currency pair in the world after the EUR/USD, USD/JPY and GBP/USD. Generally, in the world of financial investment, the AUD/USD pair is called “Aussie”. To understand its movements and its evolution, it is enough for you to know the factors that influence the quotation of each of these two currencies. This currency pair is heavily impacted by commodity prices.
Some Things to Know About the AUD/USD
To Analyze the AUD/USD it is also necessary to know that this pair is quoted with only two decimals. Its exchange rate is called floating course because it is regulated by the phenomena of supply and demand on the foreign exchange market. The bodies responsible for regulating the inflation of the two countries and, therefore, their monetary policy are the central banks, or the Reserve Bank of Australia and, in the United States, the Federal Reserve (Fed). These two banks do not have the habit of intervening directly on the Forex but their decisions and their various public communications must be taken into consideration to identify future speculative movements. On the other hand, due to the strong correlation between the price of gold and the Australian dollar, the Reserve Bank of Australia can at any time raise the value of its discount rate to limit inflation in the country. In general terms, the Reserve Bank of Australia ensures that the inflation rate never exceeds 3%. Finally, it should be noted that the interest rate on the Australian dollar is very high and for this reason some traders use it to carry trades by borrowing the yen to trade against the Australian dollar. It is also for this reason that the quotation of the Japanese currency can also be influenced by the AUD/USD pair.
Australian and US Events to Be Considered When Trading the AUD/USD
To effectively deal with the quotation of the AUD/USD currency pair, it is obviously necessary to follow both the events that influence the Australian economy and those that influence the US economy.
As for Australia, keep the following points in mind:
- The Chinese economy, given the fact that Australia exports a large part of its production to China.
- The quotation of raw materials such as iron, gold, copper, palladium and platinum that are part of the most important resources of the country.
- The Purchasing Managers Index (PMI) which is divided into three major sectors, namely construction, services and production. An PMI index above 50 indicates the growth of the sector to which it refers, while a value below 50 indicates a recession of course.
- The country’s Gross Domestic Product (GDP) and employment data are also good indicators.
- Finally, the various currency publications issued by the Reserve Bank of Australia must also be followed. Generally, this central bank communicates reference values of this currency which are very widely used as a basis by investors.
As for the United States, the following points should be followed:
- The set of economic announcements coming from this country, given that it is the largest world economy.
- The data and press releases relating to employment, non-agricultural wage bill or to the IPC, which reports on inflation, are also important data. It should be noted that the US Federal Reserve (Fed) has a double mandate and it is she who is in charge of these publications.
- The index of production prices (IPP) and its evolution over time.
- The institute of supply management (ISM) and its various press releases.
- The GDP (Gross Domestic Product) of the country that is officially published every three months.
- Retail sales as well as durable goods orders.
- Finally, of course, all the Fed’s decisions, particularly regarding the US dollar interest rate, are of primary importance in the analysis.
By carefully studying the various press releases relating to Australia and the United States you will be able to more precisely determine the most probable trends of the AUD/USD pair but you must still know how to interpret them. Inflation or consumer price index data generally leads to rapid price changes immediately after publication and it is therefore interesting to use these releases to take a position on this currency pair. In fact, in general, the FED acts on the US dollar interest rate based on these publications. Similarly, market volatility is high even when the Reserve Bank of Australia intervenes on interest rates. The publications that follow the monthly meetings aimed at evaluating the economic health of the country are obviously also very important. The inflation rate must be kept at around 2% as for all the big economies and for this reason the CPI will have a direct influence on the quotation of the AUD/USD currency pair. Still with regard to the Australian economy, we know that retail sales are an excellent indicator of consumer spending and therefore of the country’s economic growth. To conclude, it is important to follow closely the meetings of the US Federal Open Market Committee (FOMC) which take place every six weeks and which allow for interesting economic projections. The same is obviously true of the press conferences that are organized following these meetings and which generally have a great influence on the value of the US dollar.
Trading Strategies on the AUD/USD Pair
On a technical level, the AUD/USD pair lends itself equally well to short, medium and long term trading strategies. It is obviously preferable to adapt the analysis method and the type of chart to the chosen trading duration. We remind you that online brokers provide you with numerous indicators that you can view directly and simultaneously in the stock charts, allowing you to perfect the analysis. Finally, do not forget to compare the signals obtained with those of the fundamental analysis thanks to the data explained above.
Advice for Trading on the AUD/USD
First of all, it should be remembered that this currency pair is a particularly volatile pair that is influenced by numerous elements and events. The set of these events, available in the economic calendar, is generally used by traders from all over the world to fix the closing points and must therefore also serve you to place your stop orders. As we have seen previously, Australian and US economic data are not the only ones that need to be taken into account during fundamental AUD/USD pair analysis. In fact, data on the Chinese economy must also be taken into consideration, which, it should be remembered, directly affects the health of the Australian economy Finally, the publications to be followed primarily are those of the two large central banks of Australia and the United States. As for the calendar, the Fed meets every 6 weeks and these meetings are an excellent market entry point. Instead, the Australian RBA meets once a month with, of course, a similar influence on the foreign exchange market.
How to Trade the AUD/USD Currency Pair?
If you wish to trade on the quotation of the AUD/USD currency pair you can do it directly online thanks to the broker trading platforms recognized as the one, we recommend here.
