How the AUD/USD Currency Pair Works


If you’re considering trading the AUD/USD currency pair, you should first understand how this particular currency pair works. This pair is a risk-linked currency and will respond to overall market sentiment. It tends to move upward during favourable market conditions, and decline during periods of broad-based market headwinds. The AUD/USD may also respond to price changes in Australia’s main commodity exports. Knowing how AUD/USD pairs behave and how to manage their risk can improve your trading performance.

The Australian-US trade relationship has a big influence on the AUD/USD currency pair. The US and Australia have a long-term economic relationship and have developed a great deal of trust. Since the Australia-US Free Trade Agreement was signed in 2005, US exports to Australia have increased by almost ninety percent. This is good news for AUD investors. This relationship is also good news for both economies. However, it is important to keep in mind that the AUD/USD currency pair does not track the US dollar index.

While the AUD/USD is heavily based on commodity prices, other factors can also affect this currency pair. The rise and fall of commodity prices in Asia may have an impact on the Australian dollar. Moreover, the interest rate differential between the U.S. and Australia may change the attractiveness of the AUD/USD currency pair. Likewise, the Australian economy is currently performing well and looks set to continue soaring. Therefore, it is a good time to buy AUD/USD currency.

The Reserve Bank of Australia issues its monetary policy guidance on the first Tuesday of each month. Depending on whether it’s hawkish or dovish, AUD/USD could rise or fall. The RBA has a history of cutting policy rates in recent years to stimulate the economy. In fact, the Reserve Bank of Australia cut policy rates during the economic downturn to a low level of 0.25%. To stay informed on upcoming RBA policy announcements, follow the DailyFX website.

AUDUSD tends to move in tandem with gold. Australia is the third largest producer of gold in the world and ships $5 billion worth of the metal annually. As such, the price of gold tends to rise and fall in Australia. Another pair that is closely tied to gold is the Swiss franc. The Swiss franc uses the dollar as its base currency, and its values tend to rise and fall with gold. This makes it a highly volatile currency pair.

Traders use the AUD/USD currency pair to speculate on the direction of price movements. This currency pair can be purchased or sold using a CFD, or contract for difference. To buy a CFD, you must have an active account with a broker and have a minimum of $100 in cash. In addition, you can use leverage and look for low spreads to hedge your risks. If you want to trade the AUDUSD currency pair, it’s best to know more about the currency pairs that affect the price of currencies.

Understanding how AUD/USD works can help you predict market movements more accurately. Historically, the AUD/USD pair has grown in popularity as Australia’s economy has become more stable. Because of this, the AUD/USD pair was the third most popular currency pair in 2012, and its strong trade relationship with China, high interest rates, and commodity exporting have all contributed to its rapid growth. But the future of the AUD/USD is still unclear. The Australian economy has faced several significant challenges, and the AUD/USD currency pair will continue to face the same.

Despite the fact that the AUD/USD currency pair is one of the most volatile in the forex market, the AUD/USD has tight spreads that encourage traders to trade. Spreads are usually within one to three pips on most forex brokers. The AUD/USD pair’s volatility is encouraging to traders during the Asian trading session. However, you should remember that the AUD/USD pair’s volatility is highly influenced by the prices of commodities, including gold and oil.

AUD/CAD spent almost the entire month of February in a range, and range support was hit earlier this week. However, the strength of the USD has given the appearance of a potential range fill, which makes the long side of the pair very interesting for bullish USD scenarios. But, despite its strength, it’s important to stay away from short positions in the AUDUSD if you can. The USD has risen above a key resistance level and is showing signs of breaking higher.