Exchange Classroom: With so many currency pairs, why is AUD/USD so popular?

​​Content Source: Public Accounts Classroom

In currency trading, AUD/USD is also a relatively popular currency pair, with trading volume accounting for about 5% of the entire foreign exchange market. And because of the interest rate difference between the Australian dollar and the US dollar, the volatility and trading volume of the currency pair are good.

So today I will share with you how to trade AUD/USD.

AUD/USD Trading Related

The Australian dollar is the fifth largest currency in the world, accounting for 7% of global foreign currencies. It is also a commodity currency. The Australian dollar is positively correlated with the price of Australian export commodities. China accounts for the largest share of Australia's exports, followed by Japan. Among Australia's imports, China accounts for the largest share, followed by the United States.

Because Australia-China trade is one of the factors driving the Australian economy, and Australia is a major exporter of coal and iron ore. Therefore, the price of the Australian dollar currency pair with the Australian dollar as the base currency is mainly affected by the trade relationship between Australia and China, as well as the price of coal and iron ore commodities.

In addition, Australia-US trade has a great impact on the AUD/USD currency pair. Australia and the United States have a close economic relationship. As Australia is the second largest gold producer, gold prices rose as the Australian dollar appreciated.

In terms of policy, understanding the exchange rate of the Australian dollar and the US dollar mainly focuses on the intervention of the Reserve Bank of Australia and the Federal Reserve on the interest rates of the two currencies. It is necessary to pay attention to relevant data such as gross domestic product (GDP), trade balance, consumer price index (CPI), producer price index (PPI), and employment changes.

AUD/USD is best traded during Australian working hours (focus on overlap with Asian trading hours) and the most active trading hours in the US. Therefore, the best time to trade AUD and USD is 8:00-10:00 am, 14:00-16:00 pm and 20:00-1:00 am Beijing time.

Through the spreads provided by 10 foreign exchange dealers, the average spread of AUD/USD is about 15 points.

AUD/USD is correlated with other currency pairs, positively correlated with AUD/CAD, GBP/USD, NZD/USD, EUR/USD, EUR/CHF; with USD/CHF, USD/JPY, USD/ The Canadian dollar is negatively correlated.

AUD/USD Trading Strategy

If you are a fundamental news trader, you can focus on reliable news sources such as Reuters, Bloomberg, Forex Factory, Google Finance, and pay attention to the actions of the Reserve Bank of Australia and the Federal Reserve.

If you are a technical trader, using support and resistance is a common technique used in AUD/USD trading. As shown in the figure below, in the 1-hour chart of AUD/USD, the trend change of the market price is marked by the zigzag indicator, and the high and low points of the price form the upper and lower sides of the ascending triangle.

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The price is testing the upper boundary of the triangle. If the upper boundary of the triangle can act as a strong enough support, the price will rise, otherwise the price will break through the upper boundary, and the lower boundary will play a certain supporting role.

Of course, like trading other currency pairs, you can also trade AUD/USD with the help of commonly used technical indicators in your trading system.

AUD/USD is also suitable for different trading styles, if you are a scalper, you can use the 5 minute chart for quick trades. If you are an intraday trader, you can trade multiple times in one day, which is also applicable to swing trading, and the long-term holding income is also considerable.

Investors can also take advantage of the AUD/USD carry trade as Australia has one of the highest interest rates in the developed world. Trading AUD/USD in standard lots for 30 days can bring in $185 in interest, compared to only $20 in EUR/USD.

The above is today's sharing. The high liquidity of the AUD/USD currency pair can help traders make short-term profits, and it also has long-term arbitrage value. This currency pair is worth watching.