AUDUSD: Winner or Loser?
With the release of two versions of the EURUSD and AUDUSD the competition between currency markets to see who can come out on top is getting more intense. The top two currencies are making claims that they are the 'king' and the 'queen' of the global financial markets.
One of the two top contenders is the Euro. The Euro is what the world has been using since the beginning of the 20th century and the only reason it is surviving today is because it is one of the strongest currencies in the world today. The only other currency that compares to the Euro is the US Dollar and that too is struggling.
Of course the US Dollar is in trouble but does it matter at this point? As the US Dollar is dependent on its strength in the financial markets and that is what the bond markets are reliant on, then the Euro will be fine. There will be little need for the Euro to adjust its dollarization regime in the near future. So when does the Dollar fall from its perch?
If the Euro does take the lead, that would be good news for all of the currency traders, investors and traders out there. Many may say that it would be a negative factor if the Euro rises above parity with the US Dollar. This would raise the price of Euro so high that even those holding dollar would be unable to keep their positions.
This would mean that the Euro would have to fall below the US Dollar to secure the position of all of the speculators. At present there are three contenders, AUDUSD, GBDUSD and USDCAD USD and now it is up to the buyers to see which one comes out on top in the coming days.
This makes it a great way to make money. If you purchase the Australian Dollar when it is trading below the Euro you can earn yourself an income for a few years. It makes no difference whether you sell the Euro or hold it, either way it will benefit you.
You have seen this before in the past examples of different currencies and how they fare when faced with a large shift in interest rates. When interest rates rise in Australia, it creates an impulse for Australian Dollars to rise against other currencies.
The higher the level of AUDUSD the more demand for AUDUSD and the higher the level of AUDUSD the more demand for the Euro. For the Euro and for AUDUSD in Australia it is a much bigger movement than for the US Dollar. AUDUSD is also much more stable compared to the US Dollar.
It is safe to say that the European Dollar is the stronger currency of the three contenders. This is also the biggest contributor to the stability of the AUDUSD.
The problem with the AUDUSD is that it is not as strong as the US Dollar at the moment. One of the reasons why the US Dollar is in trouble is because of its weakness against the Euro. People are using their dollars to buy goods from Europe and this helps boost the Euro by creating a demand for it.
The greater the demand for the Euro the greater the demand for AUDUSD and vice versa. This means that AUDUSD will decline in the short term but stay above the Euro in the long term. If you look at it closely the equation for the future of AUDUSD is a win-win situation for everyone.