03.06.202210:03 Forex Analysis & Reviews: AUD/USD: Features and recommendations

AUD/USD refers to pairs with a reverse currency quote and indicates how many units of the US dollar (US national currency) you need to pay for one Australian dollar (Australian national currency). The base currency in the AUD/USD pair is the Australian dollar. This means that the commodity in the AUD/USD pair is the Australian dollar, and the US dollar is the second currency in the pair, which buys the base currency (Australian dollar). The Australian dollar, unlike the US dollar, is not included in the IMF basket of five major world reserve currencies: US dollar, euro, yuan, yen, and pound sterling. Nevertheless, the AUD/USD pair belongs to the category of "major" currency pairs along with the USD/JPY, EUR/USD, GBP/USD, USD/CHF, USD/CAD, NZD/USD currency pairs.

At the moment (at the beginning of June 2022), the AUD/USD pair is trading on the Forex market at a price close to 0.7260. This means that for one Australian dollar they give 0.7260 US dollars.

Features of trading the AUD/USD pair

1. Both the US dollar and the Australian dollar are highly liquid currencies. At almost any moment, there will be both buyers and sellers for the US dollar or the Australian dollar. Australia belongs to the countries with a steadily developing economy. It accounts for approximately 1.38% of global GDP. The country is approximately in 13th place in absolute terms of GDP for 2020, including per capita, which in itself is a very worthy result. The USA is in 1st and 6th place on this list, respectively. Their share in world GDP is approximately 25%. Before the outbreak of the pandemic, the GDP growth rates of Australia and the United States fluctuated near the level of 2.0% per year.

2. The Australian dollar, along with the Canadian and New Zealand dollars, has the status of a commodity currency. The most important export goods of Australia are iron ore, coal, liquefied gas, and agricultural products. Therefore, the dynamics of commodity prices has a strong impact on the quotes of the Australian dollar.

3. The AUD/USD pair is actively traded throughout the trading day. The highest peak of trading activity with the Australian dollar and the AUD/USD pair and the largest trading volumes occur during the Asian session (00:00 – 08:00 GMT) and the American session (12:00 – 21:00 GMT).

4. The surge in trading volatility in the AUD/USD pair occurs during the publication of important macroeconomic indicators for the United States and Australia. The following macroeconomic factors and indicators give the highest volatility to the AUD/USD pair:

• Decisions of the Fed and the Reserve Bank of Australia regarding monetary policy in the US or Australia
• Speeches by the heads of the Fed and RBA (currently Jerome Powell and Philip Lowe, respectively)
• Publication of minutes from the latest meetings of the Fed and RBA on monetary policy issues
• Data from the labor market of the USA, Australia
• Data on GDP of the USA, Australia
• Publication of inflation indicators of the USA, Australia

Strong macroeconomic indicators for the US or Australia lead to a strengthening of the US dollar or the Australian dollar, respectively, as they contribute to the growth of "tough sentiment" of the central banks of the US or Australia regarding an interest rate increase. And this is a positive factor for the national currency, which leads to an increase in its value.

5. Australia's most important trade and economic partners are New Zealand, China, and Japan. The publication of macroeconomic statistics from these countries directly affects the quotes of the Australian dollar, causing an increase in the volatility of trading on it. Important political events in the USA, Australia, the countries of the Asia-Pacific region and in the world also affect currency quotes, and first of all, the US dollar and the Australian dollar.

6. The sale of assets in the US or Australian stock markets tends to increase the value of the US dollar or the Australian dollar, respectively. The sale of US or Australian government bonds is accompanied by an increase in their yield and the value of the dollar or Australian dollar, and vice versa. A rise in the stock market in the US or Australia is usually accompanied by a decline in the value of the US dollar or Australian dollar.

7. The Australian dollar has a fairly strong correlation with other commodity currencies, primarily with the New Zealand and Canadian dollars. Accordingly, the AUD/USD pair has a significant inverse correlation with the USD/CAD pair (70%) and a direct correlation with the NZD/USD pair (95%). In relation to other "major" currency pairs, the AUD/USD pair has a different correlation, direct with EUR/USD (88%), XAU/USD (75%), inverse with USD/CHF (87%), USD/JPY (67%).

8. The AUD/USD pair has fairly even volatility throughout the trading day. The intraday volatility of the AUD/USD pair fluctuates in different periods of the year. On average, it is 60–70 points, but it can rise sharply during periods of publication of important macroeconomic indicators for the US or Australia.