AUDUSD is the most widely traded currency in the world. This is due to its popularity in Australia and its strength as a reserve currency. It also has strong interest rate differentials and is heavily traded in commodities such as oil and gold. However, it also faces certain risks, such as an economic downturn.
Economic stability
AUDUSD, also known as the Australian dollar, is one of the five most traded currencies in the world. It is considered to be a risk sensitive currency and is primarily tied to commodity prices.
Australia’s economy is heavily dependent on mining commodities. Coal, iron ore, and grain are among Australia’s most important exports. The mining business is expected to peak in later this year.
The Reserve Bank of Australia is a conservative institution and is slow to change its monetary policy. It has been reluctant to lift the official cash rate. Philip Lowe, RBA Governor, has expressed concerns about the effects of high rates on households.
The Reserve Bank of Australia (RBA) is concerned about inflation. The inflation rate increased to 7.3% in September, the highest level since 1990. It is also concerned about the effects of higher rates on households.
Australia is a small country, but it is among the top five largest economies in the world in terms of export value. China is its largest trading partner. This can have an impact on the Australian dollar, particularly when Chinese demand for commodities weakens.
Commodity exports
AUDUSD commodity exports play a key role in the Australian economy. China is Australia’s largest trading partner and accounts for more than 42% of its exports. The country is also Australia’s largest coal and iron ore exporter. This explains why the Australian dollar has a strong positive correlation with the prices of commodities like coal and iron ore.
The AUDUSD has enjoyed a strong recovery since the seasonal lows. The currency has jumped 30 percent since the start of the year.
The Australian dollar’s recovery has been fueled by higher commodity prices. It is also influenced by interest rate differentials. It has a higher yield than many other currencies in developed markets.
The AUD/USD currency pair is considered one of the most heavily traded pairs in the foreign exchange market. It accounts for almost 7% of the global FX turnover. The currency pair is a good gauge of market sentiment. However, it is not without its risks.
Interest rate differential
Whether you are an investor or a trader, you probably know that the interest rate differential between the Australian Dollar and the US Dollar has an impact on the currency pair. Despite the differences, AUD/USD remains very liquid, making it a very useful currency to trade.
When you first look at the difference in interest rates between the two countries, it may seem like a small thing, but it can have a big impact on the value of the currency pair. That is because interest rates are a key factor in determining the value of a currency. A low interest rate in the US would weaken the US dollar and increase the value of the Australian dollar. Conversely, a high interest rate in Australia would strengthen the Australian dollar.
One of the best ways to get a sense of the differences in interest rates is to look at the exchange rate between two government bonds. This is a better measure of the rate than the interest rate on a currency.
Technical analysis
AUDUSD is one of the most aggressive currency pairs in the financial market. Traders are interested in the high liquidity that makes it a very attractive currency to trade. It is also popular amongst carry trades, where a trader converts the Yen into the Australian dollar and takes advantage of ultra-low interest rates.
Last week, AUD/USD edged higher. But the pair closed below the top price of the last five days in the daily chart. This is considered a bearish sign.
Ahead of the Reserve Bank of Australia’s rate decision on Tuesday, the AUD/USD pair could continue to move. The RBA may raise rates more aggressively than the Federal Reserve. But it expects the economy to be subdued for the next several years.
The Australian dollar has retreated back to the 0.6641/0.6661 support level after hitting a high of 0.7501 earlier this week. It also tested the retracement zone between 0.7769 and 0.7826. However, the trend remains bearish and a sustained breakout of the 0.6835 level would trigger a bullish shift in the AUD/USD pair.
