How to Trade AUDUSD
The Australian dollar (AUD) is closely tied to its trading relationship with Asia. Changes in commodity demand from Asia affect the strength of the Australian dollar. The interest rate differential also affects the AUDUSD. Higher Australian interest rates are generally considered more attractive. However, an increase in U.S. rates could decrease the value of the AUD/USD. In such cases, it is better to buy Australian currency rather than U.S. dollar.
The Australian economy is heavily dependent on exports and commodities, so changes in global commodity prices impact the AUDUSD. For example, since 2011 the suppression of oil and gold prices has impacted the AUDUSD. Likewise, major economic and social data from the US Bureau of Labor Statistics can impact the AUDUSD. The ABS releases important economic and social data monthly and quarterly. These data releases often trigger significant price movements in the AUDUSD.
Traders may choose to ride a trend rather than trade in tight range-bound market conditions. Technical indicators, such as Simple Moving Average (SMA) lines, can help traders spot trends. Typically, AUDUSD is busier between 19:00 and 04:00 GMT, with mid-day US trading covering the Asia-Pacific session. Important macroeconomic data and central bank policy statements can also cause volatility to spike. Besides banks and commodity trading firms, retail traders are also important market participants.
When to trade AUDUSD? Using the right time can make a big difference to your end-of-day profits. Forex trading is available around the clock, but certain time periods offer higher volumes and volatility than others. The Australian working day, for example, is the busiest time for the AUD/USD currency pair. Important economic reports can also cause significant shifts, so traders should make use of this information. A good approach is to keep an eye on the AUD/USD statistics before making a trade.
The Australian dollar is known as the Aussie in the forex trading community, and is considered equivalent to the US dollar. Changes in both countries’ economies and monetary policy will affect the value of AUDUSD. The Australian dollar was floated in 1983 and closely follows the prices of commodities and Australian Terms of Trade. This is because Australia is the largest exporter of commodities in the world. Its currency appreciates in value when commodity prices rise or fall in the US, and vice versa.
Australia and the US share a great deal of global trade. A third of Australia’s exports are sent to China, which has a direct impact on the AUD. The US is another significant trading partner for Australia. The Free Trade Agreement between the two nations was ratified in 2005 and has resulted in US direct investment worth over $1 billion. In addition to China, US exports to Australia have nearly doubled in the past decade.
Moreover, the Australian dollar has a high degree of correlation with the Big Mac hamburger. In fact, The Economist’s Big Mac index measures exchange rates based on the price of a single Big Mac hamburger. Since Big Mac is available virtually everywhere, the Australian dollar is also closely linked with various factors, such as changes in global risk sentiment and speculation. So, the exchange rate of AUDUSD can be predicted using this index.
Australia’s economy has been growing steadily since 2001, although it has faced one hurdle during the global financial crisis. But recent developments have sparked the AUDUSD market. Its cyclical relationship with commodities has increased its popularity. As a result, commodities such as copper, zinc, and uranium have significant impact on the AUD base rate. In the event of a slowdown in the Chinese economy, these prices could fall even further.