WHAT IS AUD/USD?

AUD/USD is the synonym for the Australian Dollar and the US dollar currency pair. It is a measure of the USD quantity needed to buy one unit of the Australian Dollar. In this case, the US Dollar is the quote currency, and the Australian Dollar is the Bas currency. This is one of the most traded currency pairs in foreign exchange markets and is generally linked to the commodity price and the sentiment of market risks. 

Why should I trade AUD/USD?

The Australian Dollar happens to be the fifth most traded currency in the forex market. The currency is also responsible for more than 6% of the total business in the forex market. The pair is usually linked to growth and Risk at the same time. Just like the New Zealand dollar and the Canadian Dollar, the Australian Dollar can be sensitive to commodity price movements. Since Australia holds a large export of raw materials, let us look at some of the major advantages of trading in AUD/USD. 

Liquidity:

Being one of the most traded currencies in the world, AUD/USD is one of the most liquid currency pairs as well. Since the pair s highly liquid, it allows an ease of trading, minimal slippage, lower costs and a better market depth that acts as a buffer to external shocks. Liquidity in forex is an important metric that calculates the ability of a forex pair to be traded on demand and hold minimum price variance when sold or bought in bigger sizes. 

Narrow spreads:

Since it is a largely traded currency pair, the AUD/USD can have a lower spread for the retail traders. This can reduce the cost of trading, which a lot of traders have to consider before they buy a pair and trade it over the market. 

24-hour trading

The pair is tradable throughout the day from Monday to Friday, and This offers the traders a better experience and easier approaches to calculating entry and exit points. 

TRADING AUD/USD: FUNDAMENTAL ANALYSIS

currency linked to Risk- and commodity:

The Australian Dollar is a risk linked currency. This means that it is very sensitive to the overall trends and sentiments in the market. AUD/USD has a tendency to move upwards in a favourable market condition and fall in times of bad market conditions 

The prices of AUD/USD are also influenced by the major commodity exports in terms like gold, copper. And iron ore. Studying them and understanding the metrics can improve the trader performance in the market.

HOW TO TRADE AUD/USD: TECHNICAL ANALYSIS

Trading in any asset or currency pair depends on how much can the trader take in terms of Risk and the timeframe with which the trader is trading and the psychology that the trader has. There are different strategies depending on these factors. Below is an idea based on the technical analysis of how one can trade on the AUD/USD pair. 

Identify a trend:

The traders sometimes need to ride a trend to avoid making trades in a market that is tighter and works around the conditions that themselves revolve around range trading. There can be instances where the risk-reward ratio is not that much, and there are tools that can identify this like, Bollinger bands and SMA’s

 Bollinger Bands and Simple Moving Averages (SMA’s):

This is a tool that calculates the average closing price for a specific trading period. 

Simple Moving Averages (SMA) is a tool that can calculate the closing price for a selected period of trading. For example, a 50 or a 20 day period. In the case of an Uptrend, the SMA line tends to be sloped in an upward direction and moves higher. Here, the short SMAs will almost always out[ace the short term SMA’s. The reverse of this case happens in a downtrend.  

While seeing an Uptrend, the AUD/USD can trade within the limits of the upper half of the Bollinger bands. A simple flick in the middle Bollinger band line, also known as the MA, in the lower half can indicate a reversal and a bear trend. 

Most active time to trade the AUD/USD:

The trading hours of the pair are busier between 1900 and 0400 GMT. This covers the late hours of the trading in the US to the midpoint session of the Asia-Pacific. These are the most volatile hours, and the volatility may increase with the introduction of a news announcement or anything that may affect the economy of the involved countries. 

Bottom Line:

Trading in the forex market is not something that traders can do easily. Trading is hard, and forex is harder. Always make sure that the research you do is correct in the form of the things that you are looking at. To research, not only articles are enough, you need curation and better forms of research. We recommend the leading online broker HFTrading.

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