AUD/USD Edges Towards 0.6910: What to look out for when trading this pair, traders have their sights set on this key level. This blog article will guide you through what to look out for when trading this particular currency pair, helping you stay one step ahead and capitalize on the possible opportunities that await.
Overview of AUD/USD
The AUSTRALIAN DOLLAR / USD is one of the most popular currency pairs to trade. The Australian dollar is a commodity currency, meaning it is influenced by commodity prices, particularly those of gold and iron ore. The USD, on the other hand, is a major reserve currency and its value is influenced by global economic conditions. When trading this pair, it is important to be aware of factors that can influence both currencies.
Some key things to look out for when trading the AUSTRALIAN DOLLAR /USD include:
-Commodity prices: As a commodity currency, movements in commodity prices can have a big impact on the AUD/USD. Keep an eye on gold and iron ore prices in particular.
-Global economic conditions: The USD is a major reserve currency and its value is influenced by global economic conditions. Things like interest rates, inflation, and trade wars can all impact the AUD/USD.
-Interest rate differentials: The Australian economy has higher interest rates than the US economy. This can make the AUD/USD more attractive to investors looking for yield.
-The RBA vs The Fed: Another key thing to watch out for when trading this pair is the difference between monetary policy in Australia (set by the Reserve Bank of Australia) and in America (set by the Federal Reserve).
Factors Affecting AUSTRALIAN / USD
Factors Affecting AUSTRALIAN/USD:
The Australian dollar has been one of the best-performing major currencies so far this year, buoyed by a stronger-than-expected domestic economy. The Aussie has also been supported by higher prices for iron ore, Australia’s key export commodity.
However, the rally in the Aussie has lost some steam in recent weeks as the market started to price in the likelihood of an interest rate cut by the Reserve Bank of Australia (RBA). While a rate cut is still seen as a possibility, most analysts now expect the RBA to hold off on any policy change until later in the year.
In addition, the trade war between the U.S. and China continues to hang over financial markets, with no end in sight. The tariff fight has weighed on global economic growth and put downward pressure on commodities prices, including iron ore. This could start to weigh on the Australian dollar if it continues for much longer.
Technical Analysis for AUD / USD
When trading the AUD/USD, there are a few key things to look out for in technical analysis.
The first is the overall trend. Is the pair in an uptrend, downtrend, or range-bound market? Knowing the trend can help you make better decisions about your entries and exits.
These levels can give you clues about where the market might turn.
Lastly, pay attention to momentum. A strong move in either direction can indicate that the market is ready to make a big move.
Fundamental Analysis for AUD/USD
As the world’s 4th most traded currency, the Australian dollar is no stranger to volatility. Below we outline some key fundamental factors that can move the AUD/USD pair.
- Interest rates: Australia’s cash rate is one of the world’s highest and is currently at 3%. This attracts international capital, resulting in appreciation pressure on the AUD. If interest rates in Australia are increased, this will usually lead to a rise in the value of the AUD against other currencies.
- The employment situation: A strong economy needs a healthy employment market to function properly. The unemployment rate in Australia has been falling consistently over the past few years and is now at a 5-year low of 5.6%. A tight labor market generally results in wage growth and inflationary pressures down the line, which could prompt further interest rate hikes from the RBA. All things being equal, a stronger economy should lead to a higher AUD/USD exchange rate.
- GDP growth: This is a broad measure of economic activity and expansion. Stronger GDP growth usually leads to higher demand for the local currency as businesses need more of it to transact. In Australia, GDP growth has been solid recently, coming in at 0.9% in Q3 2017 (the latest data available). This was driven by strong household consumption and government spending. Another positive quarter of GDP growth would likely be met with some AUD buying by investors.
Trade Ideas for AUSTRALIAN DOLLAR /UNITED STATE DOLLAR
When trading AUD/USD, it is important to pay attention to the economic data released from both Australia and the United States. Australian data tends to be more influential on the AUSTRALIAN /UNITED STATE DOLLAR pair than US data, but both should be monitored.
The most important economic data releases for Australia are:
- GDP data
- Employment data
- inflation data
The most important economic data releases for the United States are:
- GDP data
- Employment data
- inflation data
It is also important to monitor global risk sentiment when trading AUD/USD. If the global risk appetite is high, then investors will tend to buy riskier assets like the Australian Dollar. If the global risk appetite is low, then investors will tend to sell riskier assets like the Australian Dollar.
Risk Management Strategies for Trading AUSTRALIAN /UNITED STATE DOLLAR
When trading any currency pair, it is important to be aware of the potential risks involved. Here are some risk management strategies to keep in mind when trading AUD/USD:
- Set a stop-loss order: A stop-loss order is an order to sell a currency pair if it falls below a certain price. This can help limit your losses if the market moves against you.
- Use leverage wisely: Leverage allows you to trade with more money than you have in your account. While this can maximize your profits, it can also lead to large losses if the market moves against you. Use leverage wisely and only trade with money you can afford to lose.
- Manage your risk exposure: Don’t put all of your eggs in one basket. Diversify your portfolio by investing in different asset classes and currencies. This will help reduce your overall risk exposure.
- Monitor the news: Keep up with economic and political developments that could impact the AUD/USD exchange rate. This will help you make informed trading decisions and avoid being caught off guard by sudden market movements.
The AUSTRALIAN DOLLAR/UNITED STATE DOLLAR pair is currently edging toward the .70 level and looks poised for further gains in the near term. However, there are a few things to keep in mind when trading this pair. Firstly, the Aussie dollar is a riskier currency and is therefore more sensitive to global risk sentiment. This means that any negative news could cause the pair to sell off quickly. Secondly, the RBA is widely expected to cut interest rates next week, which could weigh on the Aussie dollar. Finally, the U.S. dollar has been strengthening recently so any further gains in the greenback could put pressure on the AUD/USD exchange rate.