AUD/USD - A Report Brought to You by Q8 Trade
The AUD/USD is among the major pairs in the Forex trading world. This pair refers to the number of US dollars (the quoted currency) required to buy one Australian dollar (the base currency).
The AUD/USD is among the 7 most traded pairs in the Forex market.
The pair is trading in Australia (Aussie) and the US (US Dollar) and due to the commodity boom in Australia, the pair has gained a lot of popularity among traders.
AUD/USD Historical analysis
Before 1946, the Australian dollar was pegged to the pound where it rises when it rises and falls when it falls. But then, it was pegged to the US dollar for a short time before returning to contact Sterling again.
In 1966, the Australian dollar was launched as a decimal currency and the Australian financial system was abolished leading to large price movements and unmatched fluctuations in foreign exchange rates, especially as the open market system, was at a meeting point with the Reserve Bank of Australia.
The situation continued until 1983 and the AUD/USD began to show strength. Australia’s exports of gold, iron, and copper were behind the force accounting for about half of the country’s total exports, exceeding AU$ 1 billion.
Over time, trade relations with other countries increased, leading to the country’s prosperity, currency and economic growth.
The Australian economy and its dollar against the US dollar have gained popularity in recent years. In 2012, the Australian dollar against its US counterpart was the third most traded pair worldwide, jumping two positions in one year. This was due to the ongoing Australian-Chinese relations, rising interest rates, and the export of commodities which is the main reason for the support of the Australian dollar.
Because of RBA interventions in recent years, forex traders have begun to be drawn into this pair.
How can the value of the AUD/USD pair be determined?
The value is determined by the value of the Australian dollar. If the Australian dollar is $0.70, you need $0.70 to buy AU$1. Of course, this value changes almost instantaneously over the five trading days.
What makes the AUD/USD interesting to trade?
Australia is the 12th largest economy in the world. In 2013, their GDP stood at $ 1.56 trillion. Services represent 68.6% of their GDP. These include information, health, logistics, education, and others.
As the Australian dollar is a commodity-based currency, there is a great correlation between them and the exported goods of iron, gold, luxury, and copper. Because of this economic strength, the AUD/USD is among the pairs that are attracting traders to profit, especially with the growth of the Australian economy.
Is AUD/USD trading profitable?
The AUD/USD is one of the most traded pairs daily so it is profitable for these reasons:
- Volatility: As a result of higher interest rates between Australia and the US, traders can benefit from high levels of volume and volatility. This can mean more opportunities for profit. In emerging markets, the AUD/USD rose much faster than other pairs.
- Trade relations and GDP: The business relationship with China has allowed the Australian economy to avoid the global financial crisis. In addition, Australia’s GDP is rising. All of this makes investing in these strong economies an attractive and profitable proposition.
- Main currency performance: In recent years, the Australian dollar has become the highest performing currency. It has seen an increase of more than 30% against the US dollar.
- Economic stability: The data showed that the Australian economy rose with support from exports and commodities while maintaining a solid base with the Australian Reserve. The Australian economy succeeded in achieving growth on an annual basis while other economies suffered from the global economic recession.
- Various trading options: Due to the popularity of this pair, traders can trade through different options such as ETFs, electronic futures and other options.
- Availability of resources: Daily and weekly analysis is much easier today thanks to the pool of resources available. Websites and forums provide a market overview and analysis. Streamlined charts and charts are now customizable. You can get custom indicators, one minute, 5 minutes, 15 minutes and one hour via Q8 Trade.
However, before deciding which currency pair you would like to trade, we highly encourage you to learn more about what would you get from the platform that you choose to trade with and what are the advantages you will be getting from choosing a certain platform over another.
What are the factors affecting the performance of the AUD/USD pair?
Several factors affect the performance of the AUD against the US dollar, led by geographical factors such as commodity production in Australia, wherein the event of any crises preventing the production of goods in Australia, the Australian dollar may be shocked by it.
Chinese-Australian relations are also affecting the pair’s performance especially as China is a major Australian commodity trader and in the event of any tension in their relations, it could hurt the Australian economy.
Certainly, the monetary policy of the two RBA on the one hand and the Federal Reserve on the other is one of the biggest influences on the performance of the pair. When the Fed intervenes in open market activities to make the US dollar, the Australian dollar may appreciate against the US dollar. This happens because the actions of the Federal Reserve lead to increased supply of the US dollar and the downward pressure on the currency. Assuming no further changes, the Aussie retains its value and the relative value of the pair increases as the AUD rises against the US Dollar.
Commodity prices affect the performance of the Australian dollar because Australia is the largest exporter of coal and iron, so its currency movement relies heavily on commodity prices. During the recession of commodities in 2015, oil prices hit their lowest level in ten years and prices of iron ore and coal fell. The Australian dollar was very weak at the time, falling by more than 15 percent against the US dollar and almost reaching parity against the New Zealand dollar. We have not seen it since the 1970s.
In general, the currency pair tends the AUD/USD to pair negatively with USD/CAD, USD/CHF, as the AUD/USD is priced in USD, while currencies The other is not. There is also a correlation with the USD/CAD pair due to a positive relationship between Australian and Canadian economists, both of which depend on commodities and resources.
Price movements are often focused on the release of key economic data and indicators in the two countries, mainly GDP, exports, retail sales, industrial production, and others.
High commodity prices often create recessionary pressures on developed countries. This could lead to concern about the sustainability of economies in North America and Europe, for example. When this happens, the Australian economy stands out as a hope which can also enhance the value of its currency.
How can you trade AUD/USD via CFDs?
Many traders prefer the Aussie to the US Dollar to trade through CFDs, as it increases their ability to speculate on the movement of this pair without actually owning the currency.
Given the volatility of the pair, it is a common choice for many when considering trading in exchange for differences in the Forex market.
For example, if you decide to trade the Australian dollar against the US dollar, and you expect the AUD to appreciate against the USD, you Buy. If you think that the Australian dollar will fall against the US dollar, you Sell. If your expectation is correct, you’ll get a profit by the price difference.
Let’s make a numerical example:
If the Australian Dollar is trading at 0.7750 / 0.7760, and you have expectations that the AUD will rise against the USD, you have bought 100 of this pair’s CFDs at 0.7760.
After a while, the pair rose 30 pips, and the new price is 0.7780 / 0.7790. You decided to close your deal by selling the 100 key CFDs at 0.7790.
You bought at 0.7760 and sold at 0.7790. The difference here is 30 points. Because you bought 100 CFDs in this pair, your profit is 30x100 = $3000.
The base contract value here is (AU$10,000).
Advantages of AUD/USD trading via CFDs
- Leverage: The most important feature of CFD trading is the possibility of leverage. It allows you to increase the value of the amount you trade and multiply and to make profits according to this value, not the value of the amount you just deposited.
Example: With a 1:30 leverage, you can trade $3,000 by placing only $100 in your account.
- Various trading options: With CFD trading, you can get more profit opportunities where you can make a profit when the AUD/USD rises against the US Dollar and when it also retreated.
Example: If you think the Aussie will fall against its US counterpart, you can also speculate on this by opening a short position. If your expectations are correct, you will earn profits by buying and selling.
- Hedge: Sensitive and professional traders use forex trading on CFDs because they can protect them in times of confusion where profits can also be made when negative price movements occur.
Example: When you trade in the AUD/USD, there is a strike for coal miners in Australia which will result in the pair falling. You can also make a profit when the Aussie is falling by opening short positions which protects your investments even if prices fall.
How to trade AUD/USD pair with Q8 Trade?
- Select the financial instrument:
Choose the AUD/USD to trade as your trading instrument. Q8 Trade offers more than 300 financial instruments that can be traded through CFDs. This includes Forex, Commodities, Stocks, and Indices.
- Select the transaction type:
You need to select the type of transaction you want. If you expect the Australian dollar to rise against its US counterpart, select Buy. If you expect the reverse and that the AUD will retreat against its US counterpart, select Sell.
- Enter the volume:
Enter the number of units you want to trade from AUD to USD.
- Manage the risks:
Take advantage of Q8 Trade’s stop-loss tools which ensure you close your deal at the price you set regardless of market volatility or gaps.
- Watch your deal:
Monitor your transaction, including the stop or profit orders you set, to track and take action on your earnings or losses in real time or adjust your strategy.
- Close your deal:
If your transaction is not automatically closed due to stop or profit orders, close it when you are ready.
Why should you AUD/USD trade with Q8 Trade?
- Q8 Trade offers leverage that allows you to increase the amount of money you are trading and increase your profits.
- Q8 Trade does not charge any exchange fees in trading CFDs. You do not have the actual asset you are trading on.
- Q8 Trade has a lot of options for this pair which will diversify your investments.
- The Kuwaiti trading platform provides real-time charts, which show intraday price movements as well as a combination of fundamental and technical analysis from a range of top analysts and free recommendations on the AUD/USD.
- Q8 Trade has an agenda of the most important economic events, data, and reports that will affect the AUD/USD performance.
- The brand covers the most important economic news on Forex trading which gives you forecasts and expectations of upcoming price movements.