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AUD Trading Tips – How to Trade the Australian Dollar

Before we dive into the AUD trading tips, we have to outline that its combination with the British pound and US dollar represents some of the trendiest pairs in the Forex market.

If you are eager to trade the Australian dollar to Pound, Euro, or USD, you are the type of trader who plays on less volatility and more liquidity of currencies such as EUR/USD, USD/JPY.

By comparing and trading the forex pairs combinations containing Aussie dollars, you can earn more to spend by going into this popular destination.

So, let’s see the main properties of the Australian economy and the Aussie dollar before tackling the AUD trading tips.

  • It represents Australian currency covering territories like Cocos Islands, New Zealand, Papua New Guinea and several independent pacific islands.
  • The economy in Australia is mainly based on mining; therefore, its connectivity with the commodity prices.
  • Iron ore, gold, coal, petroleum gas, uranium are just some commodities the Australian economy relies on. It’s the moving factor of the Aussie dollar price.
  • The Aussi dollar replaced the Australian pound in 1966
  • In 1926 Aussie became one of the most traded currencies in the Forex market reaching 7 percent of the global daily share.
  • Therefore, when one is trading the Aussie dollar, it requires close attention paid to the commodity market as well.
mining in Australia
The Australian economy is highly dependable on producing and exporting commodities, particularly mining commodities like iron ore, gold, coal, and uranium.

AUD Trading Tips – Why should you trade Aussie dollars?

It’s one of the major pairs, thanks to its place in the global economy. When trading on Forex, you are trading pairs. For instance, in a currency pair, AUD/USD trading, the first is essential, and the second is your quote currency. It shows the number of dollars one can get for a certain amount of Aussie dollars.
In our example, the AUD is the base currency. The US dollar is the quote currency. Trading major currencies like USD and AUD is always linked to the trends of the commodity market. Also, it requires following a market sentiment.

The Australian Dollar is strong and liquid compared to many other currencies, not only exotic ones. Trading AUD/USD counts for the most traded in the market today. You worry less about the slippage, costs, and extreme shocks. It ensures traders can take risks and also hedge other asset types.

The highly traded tight spreads are narrow spreads for individual traders, which reduce the entire trade costs and is crucial when choosing which currency pair in Forex to trade.

When to Trade the Australian Dollar

According to four major bank reports, in 2021, AUD will rise to around 78 cents. And when it comes to the exact time of the day generally, the Forex market operates round the clock seven days a week.

But it depends on the particular pair you are focusing on. Primetime for the AUD/USD pair would be at the moment of highest volatility, at the end of New York and the Australian session and vice versa. AUD/USD currency pair trading hours are busiest at 19:00 and 04:30 (GMT).

AUD Trading Tips Using Fundamental Analysis

Major Price Indicators

Many retail investor accounts lose money because they are not focused enough on the news and data release. It is fundamental for trading on Forex.

Fundamental analysis is critical when talking about major pairs. Commodity prices and geopolitical turbulence can lead to significant turmoil in the markets.

The Australian dollar could turn out to be a risky currency sometimes and commodity-linked because it’s sensitive to price movements and market sentiment. For instance, AUD/USD goes up if the conditions are favorable.

The price of commodities such as petroleum gas, gold, copper tremendously influences this currency pair. Make sure to learn the ropes of these correlations and stay up to date so you can better make your trading decisions.

The American dollar price dramatically influences the Aussie price, the Australian economy’s GDP, employment data, and consumer behavior and confidence. As an investor, you ought to keep up-to-date economic calendars that make part of every series brokerage service. When there are economic booms and robust demand for buy the Aussi results in stronger AUD/USD and vice versa.

The Central bank limits the short-term exchange rates for the Aussie dollar and issues monetary guidance every month. Make sure to check it out. During the pandemic, the RBA slashed the policy rates to an all-time low. Therefore, the AUD/USD fell sharply.

Australia is very dependent on Chinese economic data because the two economies are related. Chinese industrial production and GDP are among the most influential factors to follow when trading some pairs containing AUD.

AUD/USD, matie
The pairing of AUD/USD is also known as matie and aussie, and it is considered a commodity pair because of the aussie’s strong correlation to gold.

AUD Trading Tips – Use technical analysis

Depending on your expertise, technical analysis is your best warner on the trading trip on the Forex market. So, before you venture into the journey, make sure to know how to read technical charts. Every little “candlestick” line and point might help you make better trading decisions and notice the risk warning of losing money. And not only a high risk of losing but also pocketing significant profits.

Also, depending on your psychology and preferences as a trader, there are so many trading strategies from long term to short term and scalping that you don’t have to worry if there is one fitting you. To create the best possible strategy, you need to follow the technical charts the brokerage platform offers. Let’s see the common indicators to follow to stay on top of the market movements.

Identify Uptrend, Downtrend

Of course, there is always a way to ride a trend. In that way, you avoid risky-to-thigh market conditions. It’s because the risk-reward ratio is too low. So, look for a tool that can precisely detect the trend you need to make a profit. One of which is the Simple Moving Average.

Simple Moving Averages (SMAs)

SMA is a fantastic tech analysis tool that calculates the closing price average for a selected period, like 20Day, for example. It tends to be sloped upwards and moves higher in an uptrend, with the shorter-term SMAs (10-Day) outpacing the longer-term SMAs.

The reverse is true for a downtrend. In an uptrend, AUD/USD may trade within the upper half of the Bollinger Band indicator.

A flip below the middle Bollinger Band line – a moving average – into the lower half may signal a bearish trend reversal (and vice versa).

One of the most used and best trading strategies for AUD/USD trading carry trade; trade overnight in the hope the price will go in your favor. When applying this strategy, make sure what the swap rates are, how they impact your trades and the cost of trading.

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