The Australian and American dollars pair is considered one of the most popular in the Forex market. It is easy to conduct technical analysis on the instrument and it brings a stable profit.
The Australian and American dollars (AUD/USD), or the Aussie as it is called, is a very good currency pair for trading. The movement of market prices mainly depends on commodity markets, as well as the Chinese economy.
You may wonder why the economy of China, and not the economy of Australia. China has the second-largest economy in the world, and about a third of Australian exports go to China. Thus, you expect that any monetary policy pursued by China, any growth or recession in the Chinese economy will lead to the movement of AUD/USD.
In addition, with regard to the commodity market, Australia is a major producer of gold, iron, coal and other similar products. Thus, any impact on commodities has a direct impact on the Australian economy.
When trading AUD/USD, traders should pay attention to 3 main points and be sure to consider them when trading.
Aussie is a very volatile currency pair. This happens because both currencies are affected by many factors that can manifest themselves in completely different ways. This determines the period that traders choose to trade.
Traders should also closely monitor Chinese data, such as the index of business activity, inflation, monetary policy, and GDP.
Traders should closely monitor the decisions of the Central Banks of Australia and the United States. The Reserve Bank of Australia (RBA) holds meetings monthly, and the Federal Reserve in the United States holds meetings every six months.
In addition to the above, traders need to consider the PMI in three parts for each sector: construction, services, and manufacturing. If the PMI is above the level of fifty, then this indicates the growth of a particular sector, and if the output is below fifty, this indicates a decline in this particular sector.
Other important data are the gross domestic product (GDP) and employment data.
Every time a currency pair is associated with the United States, traders should remember that the United States has the largest economy in the world, and therefore almost all economic news releases coming from the United States are of great importance.
The Federal Reserve, which is the US Central Bank, has a dual mandate. Therefore, information about job availability, that is, both Non-Farm Payrolls and CPI (Inflation), are of great importance to traders.
However, other equally important economic news releases have a big impact on the US economy. These include producer price index (PPI), Institute for Supply Management (ISM), both manufacturing and non-manufacturing, ADP, GDP, which is published quarterly, retail sales and orders for durable goods.
Having studied the economic releases from Australia and the United States that may affect AUD/USD, now let's see what traders should expect from these releases.
Traders should prepare for a fast-moving market, especially when the Consumer Price Index (CPI), inflation is published. This is because this economic release is forcing the Central Bank to act quickly and change interest rates.
In addition, traders should expect a very volatile market when the Reserve Bank of Australia (RBA) decides on the interest rate, as well as during its meetings, which it holds monthly to assess the situation in the Australian economy.
Like any other large economy in the world, the RBA has the mandate to maintain the inflation rate of the Australian economy at about 2%, but mostly below two percent. Therefore, traders should carefully monitor the CPI, inflation because it comes from a very balanced movement since the RBA must do everything possible to fulfill its mandate.