The Aussie dollar is a currency that is popular among investors. Its values depend on the commodity prices of the various commodities that it is tied to. If the prices of the commodity are too high, then the AUDUSD will lose value. This is a major reason why traders buy and sell this currency. When it comes to trading the AUDUSD, you need to be prepared with all of the necessary information in order to make a good profit.
Commodity prices affect the Aussie dollar
Australia’s economy has been driven by demand for commodities. The country’s major exports include iron ore, coal, and natural gas. In recent years, the country has seen a surge in the value of its exports and a rise in its terms of trade.
A strong currency has its benefits, but it can also reduce the profitability of companies dependent on the export of raw materials. Historically, the Aussie dollar has tended to rise in conjunction with commodity prices.
A strong currency can boost the Australian economy because exporters are able to increase the amount of output they can produce. However, the downside is that the Aussie dollar could decline if commodity prices fall.
In recent weeks, the Fed has signalled a slowdown in the rate hikes it plans to make this year. This has boosted the Australian dollar, especially after its strong performance in the past few months.
Commodity prices can affect the Australian economy through increased investment and higher demand. These effects can be a good indicator of the health of the global economy.
Trade relations between the U.S. and Australia
Australia is an important trading partner for the United States. The two countries have had a strategic relationship for many years. Both share a deep cultural affinity, democratic values, and strong people-to-people ties.
The United States is one of the largest foreign investors in Australia. Foreign direct investment in Australia rose 10 percent from 2019 to 2020. Trade relations between the two nations are also thriving in high-tech goods and services.
In 2020, Australia was the sixth-largest goods export market for the United States. This is a very good opportunity for Australia to build deeper ties with the U.S.
In 2019, the United States has a trade surplus of $8.1 billion with Australia. Compared to the prior year, the goods trade surplus decreased 40 percent, while the services trade surplus decreased 30 percent.
The two countries have been formally allied in the Gulf War, the Korean War, and the Vietnam War. They are also members of various international organizations, including the United Nations, the World Trade Organization, and the Organization for Security and Cooperation in Europe.
Volatility of the AUD/USD
The AUD/USD currency pair is among the most traded pairs in the forex market. It is one of the few pairs that is volatile throughout all trading sessions.
The pair has been trading in a range of 0.8300 to 0.6500 from 2015 to 2019. In 2011, the Australian economy saw a slowdown which led to an all-time low of 0.4855 on March 1, 2001. Thankfully, fortunes turned around, setting the Australian economy on a growth path.
It is possible to predict the AUD/USD’s volatility with a GARCH model. Engle (1982) and Bollerslev (1986) introduced a series of models designed to forecast volatility. These models are based on squared residuals from the underlying model.
One of the models is particularly well-suited to modeling the volatility of the AUD/USD. Despite the presence of an asymmetric model, it is actually not the most stable of the lot.
A statistically significant autocorrelation of returns at lags ranging from 1 to 40 is a good indicator of a changing volatility.
AUDUSD trading hours
The Australian Dollar is one of the most widely traded currencies in the world. It is a risk-linked currency, and it is very sensitive to general market sentiment. Hence, traders must remain conscious of monetary policy and interest rates.
AUDUSD trading hours vary between regions. The most active time period is the US trading hours. This is when most non-farm payrolls are released, and manufacturing activity is at its highest.
Generally, a dovish statement by most RBA board members will cause the AUD/USD to fall. However, a hawkish statement will push the Australian dollar higher.
Intraday volatility spikes when Australian economic data is released. The typical spike is around 20 to 25 pips.
A strong reversing trend can lead to substantial financial losses. For this reason, traders should wait for consolidation in the near-term support and resistance.
Traders should also take note of Australian monetary policy and the RBA’s policy guidance. If the RBA continues to cut rates, the Australian dollar may fall.