Australian Dollar - US Dollar Price Analysis

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Among the currency pairs that are gaining popularity in Forex for individuals, the AUD/USD cross holds an important place. Indeed, this currency pair has the particularity of being very liquid and of being able to be analyzed by studying different very precise indicators. To find out more about how to analyze this parity and the indices to follow to best anticipate trends, here are some practical explanations and some tips to follow.  

Elements that can influence the price of this asset:

Analysis N°1

First of all, don't forget that this currency pair is a particularly volatile cross listing which is influenced by various elements and events. All of the events that you can find on the economic calendar are generally used as an expiration point by traders around the world and should therefore also be used to place your stop orders.

Analysis N°2

As seen above, Australian and American economic data are not the only ones to take into account during your fundamental analyses of the AUD / USD cross listing data concerning the Chinese economy also needs to be taken into account which, to be frank, directly influences the Australian economic health.

Analysis N°3

Finally, the publications to be monitored as a priority are those of the two major central banks in Australia and the United States. Regarding their calendar, know that the Fed meets every 6 months and that the meeting is an excellent entry point into the market and that the Australian RBA meets once a month with a significant influence on the foreign exchange market as well.

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Australian and American events to take into account when trading AUD/USD:

To effectively analyze the price of the AUD/USD currency pair, you must of course monitor both the events influencing the Australian economy and those influencing the American economy.

Regarding Australia, the following points should be tracked:

Regarding the United States, the following events should be monitored:

By carefully studying the various press releases concerning Australia and the United States, you will be able to determine more precisely the most probable trends of the AUD/USD cross listing. But you still have to know how to interpret them.

Inflation or consumer price index data generally lead to rapid price movements immediately after their publication. It is therefore interesting to use these releases as part of your analyzes on this currency pair. The Fed generally acts on the interest rate of the US dollar according to these publications.

Likewise, market volatility is important when the Australian Central Bank also intervenes in interest rates. The publications following the monthly meetings that are aimed at assessing the economic health of the country are of course also highly important. The country's inflation rate should be kept at around 2% as with all major economies. As a result, the CPI will have a direct influence on the price of the AUD/USD currency pair.

Continuing with the Australian economy, we know that retail sales are an index of choice when it comes to consumer spending and therefore the country's economic growth.

Finally, it's important to closely monitor the meetings of the FOMC or Federal Open Market Committee which take place every 6 weeks and allow for interesting economic projections. This of course also applies to press conferences which are held following these meetings and which generally affect the value of the US dollar considerably.


Some tips to set up a good trading strategy on the AUD/USD cross listing:

From a technical point of view, the AUD/USD cross listing is suitable for short, medium or long term trading strategies . You should of course adapt the analysis method and the type of chart to your investment horizon. Remember that online brokers provide you with diverse indicators that you can display directly and simultaneously on your stock market charts and which will allow you to refine your analysis. Finally, don't forget to compare the signals obtained with those of fundamental analysis through the data explained above.


What is AUD/USD?

AUD/USD is the exchange rate between the Australian Dollar and the American Dollar which here, is specified in the number of American Dollars for an Australian Dollar. Its price therefore equals the value of the Australian Dollar in US Dollars.

Although in France AUD/USD is a currency pair still little known, it still represents over 6% of all transactions on the foreign exchange market. AUD/USD is therefore the 4th most traded currency pair in the world, after the EUR/USD, the USD/JPY and the GBP/USD.

When surfing the internet and more specifically in the world of financial investment, the AUD/USD parity is called "Aussie". To understand its movements and developments, you simply need to know the factors that influence the prices of each of these two currencies.


Indicators to be monitored

There are many indicators that predict the AUD/USD rate.

First, the Australian Dollar is strongly associated with the New Zealand Dollar. The historical correlation is estimated to be nearly 96% for the AUD/USD and NZD/USD cross listings. This close correlation is due to the fact that the two countries have a rather important commercial partnership due to their geographic proximity.

Another important indicator regarding AUD/USD is the price of gold. The Australian Dollar is highly dependent on this price since Australia is one of the largest gold producers in the world. As a result, when gold prices rise, the Australian Dollar tends to reverse while conversely, when they drop, the price of the Australian Dollar also tends to drop. The correlation level between the Australian Dollar and gold is estimated to be around 87%.


Things to know

To analyze AUD/USD, you should also know that this pair is rated with only two decimal places. Its exchange rate is called floating rate since it's governed by supply and demand phenomena on the foreign exchange market.

The bodies responsible for regulating inflation in these two countries and therefore their monetary policy, are the central banks, namely the Australian Central Bank and the Federal Reserve or Fed for the United States. While these two banks aren't in the habit of acting directly in the Forex, their decisions and various public communications need to be taken into account in order to detect future speculative movements.

Additionally, due to the strong correlation between gold prices and the Australian Dollar, the Australian Central Bank can at any time increase the value of its key rate in order to limit inflation in the country. In general, the Australian Central Bank committee ensures that the inflation rate never exceeds 3%.

Finally, notice that the interest rate on the Australian Dollar is very important and that because of this, some traders use it undertake carry-trading by borrowing the Yen to exchange it for the Australian Dollar. This is why the prices of the Japanese currency can also be influenced by the AUD/USD parity.

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