For those who do not have any experience in the Forex markets, a little understanding about the acronym AUDUSD and its close relation to the other major currencies can make you comfortable in this Forex market. For ease of reference, the commonly used abbreviation for the Forex market is USD. The term USD stands for the United States Dollar. The two currencies are closely related but different in nature. Generally, the AUDUSD has been on a steady rise since the global financial crisis began and this trend is likely to continue.
The recent economic recession has had a negative impact on the country’s economy in terms of growth and employment. This resulted in a sharp decline in the gross domestic product (GDP) and employment figures fell by 3.5 percent during the period. This brought about a serious decline in the currency value against many other major commodities currencies. The main problem faced by the Canadian economy is the loss of manufacturing and employment as a result of the reduction in the manufacturing sector.
Economic analysts are trying their best to analyze and predict where the country might be heading towards next so that they can provide adequate support to the Canadian economy. The main indicators that they are using include current interest rates and balance of payments reports. The USDCAD is the most important index when it comes to commodity currencies. The two main members of this particular pair are the Canadian dollar and the US dollar.
The Canadian dollar and the US dollar are both derived from the same international market and the rates between the two are always equalized on a daily basis. A higher exchange rate between the two quote currency indicates that the Canadian dollar is stronger than the US dollar. Conversely, a lower exchange rate shows that the US dollar is stronger than the Canadian dollar. On the contrary, the AUDUSD and the GBPUSD have a negative correlation, which means that the strength of the Australian dollar is stronger than the British pound.
There are three important indicators that are used in order to determine the strength of the Australian and the USDCAD and these are the MACD, the CCIX and the EURUSD. The MACD or the moving average convergence/Divergence is considered to be an excellent indicator for the currency pairs in question. The MACD uses closing prices as its measure of the market direction while the CCIX utilizes the open interest based on the number of transactions in the previous six months. The EURUSD and the AUSUSD have a high and a low correlation with respect to the other components.
The strength of the Australian dollar against the USDCAD has been weakening consistently over time and this trend is expected to continue. Recent developments in Australia indicate that the economy there is slowing down and this may affect the US Dollar. A strong Australia dollar would imply that imported goods cost more in the local market while a weak Australian dollar would imply that imported goods cost less in the domestic market. Due to this dynamic shift, the USDCAD is now trying to weaken against the AUSUSD in order to boost the New Zealand Dollar and prevent the AUDUSD from strengthening against the NZD. However, if the New Zealand economic situation turns around stronger than expected, the AUSUSD could possibly emerge stronger against the AUDUSD and this could result in the AUSUSD strengthening against the GBPUSD.
As discussed earlier, the relationship between the USDCAD and the AUSUSD is determined by the exchange rate between the USD and the Australian Dollar, which are determined by the strength of the AUSUSD compared to the AUDUSD. If the AUSUSD strengthens versus the AUDUSD, then this indicates that there are strong winds in Australia’s economy while the AUDUSD weakness suggests that there are bad winds in Australia’s economy. The major international financial institutions have been watching the Australian economy very closely and if there is a sense that the economy will show signs of recovery, then many of these institutions will move their investments into Australia. If the New Zealand economy also shows signs of recovery, then the NZD will be pressured against the AUSUSD. If the USDCAD weakens versus the AUSUSD this will have a negative impact on the Australian dollar.
This is just one example of the many relationships that are affected by the Australian and New Zealand Dollar. It is important to remember that there are many other factors that can influence the movements of the currencies of both countries. There is no telling when the next major event is going to occur, but it is important to stay informed so that you are better prepared to make the best possible trading decisions in the current environment.