The Australian Dollar (AUDUSD) and New Zealand Dollar (NZDUSD) are both major international currencies. Australia is one of the world’s leading contributors to the global economy, contributing around one-third of the G7 GDP. In recent years, Australia has experienced economic growth, although slower than many of its neighbors. The strength of the Aussie dollar is supported by an attractive trading position over the last few years. Unlike many currencies, the Australian dollar has consistently performed well, particularly against most of the major currencies over the past decade.
If you’re an investor interested in trading the AUDUSD, you don’t need a lot of background to be able to understand the recent movements in the market. To understand how the value of the Australian dollar is influenced by various external factors, you should become familiar with the basic concepts of market dynamics. Market dynamics is a term that describes how prices of underlying assets or liabilities change in response to external factors. There are two components to this concept; a fundamental dynamic that drives the price of the asset or liability in question, and a technical component that describes how the asset or liability changes over time. By combining these two concepts with the performance of the Australian dollar over time, you can get a better picture of how AUDUSD is likely to behave.
One of the first things you should learn about currency markets is how to interpret the Australian Dollar compared to other major currencies. Unlike many forex trading currencies, the Australian Dollar is usually determined not only by the domestic economy but also by the foreign exchange rate in the region. The AUSUSD exchanges very strongly against most of its counterparts during times of economic stress or war. When the foreign exchange rate is low, the AUSUSD becomes stronger, making it more feasible for investors to sell the Australian Dollar and take profits from its strengthening position in the market. Conversely, when the foreign exchange rate is high, the AUSUSD trades down and this prevents the currency from strengthening to the point where investors would sell the Australian Dollar in an effort to take advantage of the increase in the value of the USD.
To determine what direction the AUSUSD is going to move, forex traders need to know which pairs of currency will be strongest against the AUSUSD. Traders will use either the US Dollar index or the Euro index to determine which currency pairs will be strong against the AUSUSD. These are generally referred to as “commodity currency pairs.” A few years ago, the United States Dollar and the Australian Dollar represented the bulk of the Forex market. Currently, however, the United States Dollar and the Euro are the largest commodities currency pairs in the world. While some may view this as a bad thing for the AUSUSD, it actually serves to strengthen the currency compared to other similar currencies.
Once you have determined which currency pairs have the greatest potential for strength in the international markets, you can begin to look at which of those pairs has the best potential for strength versus the AUSUSD. In recent years, the EUR/USD has been a strong trading pair. In some ways, it represented the ideal scenario for an investor who was seeking to obtain exposure to the AUSUSD without having to rely on major currencies. At the same time, the strength of the EUR/USD held down the Australian Dollar against other major currencies, which served to reduce the demand for the AUSUSD.
The good news is that with a little bit of analysis, it is possible to identify what the trend is regarding the AUDUSD. This allows you to either trade the AUSUSD when it is strong or trade it when it is weak. One of the best ways to do this involves examining the daily and weekly trading charts for the AUSUSD and the following indicators:
Generally speaking, you should attempt to get in and out of the trade quickly when it is strong and let it ride for a while before pulling out. Conversely, you should not let the AUSUSD trade freely until it begins to weaken. If you have been using this strategy successfully, then you may be ready to experiment with a different approach. Keep in mind that even if it takes a little bit more effort to forecast the strength of the AUSUSD, it will be well worth it in the long run. To the extent that you are a new trader or are finding that your strategy does not work as well as you would like, consider reviewing some of the materials available on the link below that address these issues in greater detail.
While Forex trading is an exciting and potentially lucrative business, it is not without risk. Therefore, you should always use your best judgment and employ sound money management principles in order to maximize your returns. Using the information available on the Forex market as well as on Forex technical analysis can make it easier for you to determine whether or not the strategies you are implementing are working as they should. Finally, you may want to review some of the material that we’ve outlined here in order to determine how you can apply these Forex currency trading methods to a specific situation. We wish you the best of luck in your Forex currency trading endeavors!