The value of the AUDUSD depends on various factors that include the Australian economy and the US trade-relations. These factors have led to an increase in the Australian dollar in recent years. This article discusses the economic reasons for this trend and offers a technical analysis on the AUDUSD pair.
The Australian dollar is one of the most sought after currencies in the world. This is because of the country’s geographical location and stable economy. A lot of money from overseas moves into the country to purchase Australian goods. In turn, demand for the currency boosts its value.
Purchasing power parity theory suggests that the exchange rate between the Australian dollar and the US dollar is directly related to the price of a basket of goods. For instance, a higher commodity export price leads to an appreciation of the AUD.
Similarly, a lower commodity price reduces the value of the Aussie. However, it may not be enough to drive the exchange rate up.
Another major factor to consider is interest rates. The Reserve Bank of Australia has hiked its cash rate target by 25 basis points to 3.10%. While the RBA wants to contain inflation, it is a bit concerned about the threat of a recession.
Trade-relations between Australia and the US
Australia and the United States share a history and cultural ties that are deep and diverse. They share interests in defense, trade, research and development, tourism, and education. This relationship is unique in its depth.
The United States is one of Australia’s largest foreign investment markets. Australian investment in the United States is worth one-third of its GDP.
Australia and the United States are formally allied. The two countries have been bound by a formal military alliance since 1951. Their relationship has also strengthened through a free trade agreement.
Both sides share a strong commitment to rule of law and property rights. In addition, the two nations have long shared a sense of mutual respect.
Both countries are part of many international organizations, including the World Trade Organization and Asia-Pacific Economic Cooperation. These organizations play an important role in strengthening the bilateral trade relationship.
Australia’s investment in the United States has increased almost double in the last decade. It was estimated to be worth more than $486 billion in 2020.
Economic factors that influence the value of the Australian dollar
The value of the Australian dollar is influenced by a number of macroeconomic factors. For instance, interest rate differentials and commodity prices can affect the exchange rate. However, the AUD is also subject to other factors that have the potential to have a longer term effect.
Firstly, the Federal Reserve of the United States can have an impact on the value of the AUD. Higher US interest rates can push the exchange rate downward.
In addition to the US Federal Reserve, other macroeconomic factors can influence the exchange rate. These include the Reserve Bank of Australia’s (RBA) monetary policy and commodity prices.
As the world becomes increasingly interconnected, the Australian dollar is exposed to various factors that can cause it to fluctuate. Some of these factors have a long term impact, while others are only relevant for short periods.
Commodity prices are important because they can affect export pricing. Increased demand for goods made from these commodities may spur companies to increase output capacity. This can also help to boost the value of the AUD.
Technical analysis of the AUD/USD pair
The Australian Dollar is a popular currency among Forex traders. It is primarily influenced by several factors, including trade relations with its primary trading partners, China and the United States. As a result, it is highly volatile and is often subject to substantial volatility.
In addition, the Australian dollar is closely tied to the global commodity price cycle. When commodities such as gold and coal experience large declines, the value of the AUD is also lowered. On the other hand, when key commodities begin to increase in value, the value of the AUD increases.
The AUD/USD pair has been in a consolidation phase in the last few days. After reaching a peak of 1.09767 on April 1, 2011, the pair has been fluctuating between 0.8300 and 0.6500.
After a temporary top was formed at 0.6949 in the AUD/USD pair, a fresh decline began from the 0.6920 zone. The Aussie Dollar now trades below 0.6850. However, its outlook remains bullish as long as 0.6721 support holds.