Investing in Commodity Currencies

When it comes to understanding the foreign exchange (forex) market, you need to know what the major currency pairs are. The best time of day to trade these for pairs depends largely on the market opening hours; certain pairs are much more heavily traded at various times of the afternoon depending on which markets are open. For ease of reference, the major currency pairs will be looked at briefly here, including the GBPUSD (UK Pound Sterling), EURUSD (European Eurozone), USDGCAD (US Dollar Convertible), NZDUSD (New Zealand Dollar) and AUDUSD (Australia Dollar). Some of these currencies have significant global influences; for instance, the GBPUSD and NZDUSD are significant in Australia and New Zealand, the EURUSD and the USDGCAD are important world currencies, and the USDCAD is the main international currency in the United States.


A note of caution regarding trading the AUDUSD and the NZDUSD – these forex pairs are highly volatile and should be approached cautiously. If you are a novice trader seeking to learn how to trade these pairs, you may want to start off using the USDCAD as a stop loss and move your way up using other currencies. There are several advantages for using the USD over the other currencies. Firstly, the USDCAD is highly correlated with the euro, Japanese Yen and Australian Dollar thus if one or more of these currencies fall you will also be safe protecting your exposure to the euro or the Japanese Yen in case they drop. This is an important benefit and should be understood before jumping into the market.

An advantage of trading the AUDUSD and the NZDUSD is that the Australian dollar is not strong against the euro, the Japanese Yen or the Australian Dollar. Therefore this gives us two excellent reasons to own the Australian dollar. One caveat though, even though the AUDUSD has low correlation with other currencies, the strength of the Australian dollar still has the potential to take a dive when compared to other currencies. It is important therefore to understand that this has the potential to happen and to avoid the potential losses when this happens.

There are two important indicators to look out for when assessing the Australian Dollar and its strength versus the other major currencies. The first of these is the closing price of the Australian dollar (the current market price). As we previously mentioned it is strongly correlated to the euro so the higher the closing price the better. This indicator shows how strong the currencies are in relation to each other. The next is the average moving averages, which are the most powerful moving averages around the market.

These moving averages are calculated as a moving average of price over a certain period of time. To the casual observer they might seem fairly simple but to a professional investor who understands how markets work the move averages show a clear pattern. They show the relationship between currencies over a certain time frame. They can be used to confirm whether the currency being traded (in this case the euro) is strong or weak relative to the others. Most of us have heard of the zigzag method of assessing the strength of a currency and this works very well for the AUDUSD.

There are many different base currency pairs that can be traded on the Forex market. The Australian Dollar and the New Zealand Dollar (NZDUSD) are considering a single pair because they have a very strong correlation. So what makes them a good base currency pair? The strength of the Aussie dollar is usually reflected in the strength of the NZDUSD; if the Aussie is stronger than the NZD the gbps will be stronger in relation to the NZDUSD and vice versa. This means that they form a very strong support and resistance zone.

One of the most important things that you should know about the AUDUSD and the USDCAD is that they follow very similar patterns. The major difference between the two pairs of currencies is that the USDCAD is often times more volatile than the Aussie dollar. When it comes to investing and trading the Canadian dollar can be extremely dangerous to both the trader and the investors involved. For that reason it is important for people who are new to commodities currency pairs to stay away from the AUSDCAD until they learn more about it. They should instead focus their attention on the other two major commodity currency pairs that are the GBPCHE and the AUDCHE.

While there are a lot of similarities between the two pairs of currency, the differences also prove to be quite valuable. For instance when it comes to making money with the AUSUSD you don’t really need to know much about the commodity itself in order to trade successfully. On the other hand gold has been proven to be an excellent way to make money. If you have a little bit of money tied up in gold then you will find that the AUSUSD can do very well over time. On the other hand gold doesn’t do so well when it comes to trading and maintaining a consistent profit margin. This means that eurusdchf traders will find that the AUDUSD and the USDCAD are both good ways for them to make some money in the market.

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