The Australian dollar has a pivotal role in international commodity and forex trading, and it has an AAA Debt rating. The Australian economy’s political and economic stability is an added bonus. However, before beginning your AUD/USD trading career, it is important to understand the role of the US dollar, which accounts for 25% of the world’s nominal GDP. A strong reversing trend will cost you a substantial amount of money.
In the United States, the Federal Reserve sets monetary policy. Its dual mandate includes keeping inflation low and structural unemployment low. As such, it actively intervenes in the market to prop up the economy while maintaining price stability. This means that the Australian side of the currency pairs usually leads movements in the USD/AUD pair. Nonetheless, there are a few exceptions. For instance, the Reserve Bank of Australia can influence the value of the Australian dollar, as it can manipulate its interest rate by making changes in policy.
IG’s client sentiment tool can be extremely useful for traders who want to know how other traders feel about AUD/USD. The IG client sentiment tool shows retail traders’ aggregate net-long and net-short positions in AUD/USD. IG typically takes the opposite view of crowd sentiment, and if the majority of retail traders are net-long, the currency pair may drop. Conversely, if the majority of retail traders are net-short, then the currency pair may rise.
Moreover, the AUDUSD Forecast Poll reveals that the Australian dollar is expected to strengthen moderately against the US dollar in 2020. The AUDUSD Forecast Poll reports that the average outlook for 2020 is 0.7684. The AUDUSD is a currency pair that tells the trader the amount of US dollars required to purchase one Australian dollar. It is also known as the Aussie, “New Zealand Dollar,” and “Canadian Dollar” and is the fourth most traded currency pair on the Forex market, accounting for 5.2% of all forex trades.
The AUDUSD is a risk-linked currency, and as such, it is sensitive to overall market sentiment. While it generally moves upward when global economic conditions are favorable, it tends to fall in the face of broad-based market headwinds. The price of Australia’s main commodity exports may also affect the AUD/USD, so gaining an understanding of these factors will improve your trading performance. The AUDUSD is traded on the forex market twenty-four hours a day, from monday to friday.
Australian-US trade relations are another major factor affecting the AUD/USD currency pair. The two countries enjoy a very close economic relationship and are trusted trading partners. The US invests more than eight hundred billion dollars in Australia. This relationship is bolstered by the Australia-United States Free Trade Agreement, which came into force in 2005. Since then, the Australian economy has increased its exports of US goods by 91%.
When to Trade the AUDUSD
The AUDUSD currency pair is also known as the ‘Aussie’, and is the fifth most traded currency in the world. It is characterized by tight spreads, and often stays within a range of a pip or three on most forex brokers. Traders can also benefit from the AUDUSD’s favourable correlations with other currencies and commodities. These factors can affect AUDUSD’s value, so it is vital to research these before beginning your trading.
The AUDUSD is consolidating below key resistance levels, and could resume its primary uptrend. It has also formed a Bull Flag continuation pattern. A daily close above 100% Fibonacci would signal a resumption of the primary uptrend, paving the way for a 3.9% climb to the 0.7800 level. It may take a few days before it regains the psychologically important 0.7100 level.