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Trading AUD/USD

The popularity of the AUD/USD currency pair, otherwise known as the ‘Aussie’, has surged in recent years.

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As a result of Australia’s commodity boom in recent decades, the pair now unites two expanding and influential economies. This page will break down everything you need to know about the AUD/USD pair, from its benefits and drawbacks to currency correlations, history, and strategy, including trading hours, signals, charts, and top tips.

AUD/USD Trading Brokers

Trade Forex on 0.0 pip spreads with the world's leading True ECN forex broker - IC Markets.

Great choice for serious traders. ASIC regulated.

Pepperstone of spreads from 0.0 pips on the Razor account and have almost 60 pairs available to trade. Lots start at 0.01.

Binary.com deliver advanced forex trading via the MetaTrader5 platform and 3 Account Types

Forex trading is offered on 55 pairs, with spreads from just 1 pip on the Exclusive Account.

NinjaTrader offer Traders Futures and Forex trading.

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Use Auto-trade algorithmic strategies and configure your own trading platform, and trade at the lowest costs.

Invest.com provide portfolio management plus standard trading. Leverage and spreads improve with each account level - Bronze, Silver or Gold

ATFX are an award winning, UK regulated broker.

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Offering Forex and CFDs with competitive spreads and a customer service focus.

Alpari International offer forex over a huge range of pairs including Major, minor and exotic pairs. All with competitive spreads and laddered leverage.

Trade 33 Forex pairs with spreads from 0.0 with the 'Zero' account.

Prices quoted to 5 decimals places, and leverage up to 1:1000

Vantage FX are a Raw ECN Forex broker, regulated by ASIC is Australia.

Boasting MT4, MT5 and Webtrader platforms, a range of account types and a deposit bonus of up to 50%

Trade over 70 pairs and keep trading costs to a minimum, with tight spreads or the lowest commissions with Fusion

Just2Trade offer hitech trading on stocks and options with some of the lowest prices in the industry

New Forex broker Videforex can accept US clients and accounts can be funded in a range of cryptocurrencies.

Payouts reach 95% per trade.

Zulutrade provide multiple automation and copy trading options across forex, indices, stocks, cryptocurrency and commodities markets

Plus500 Offer forex trading via CFDs with tight variable spreads and a range of well over 70 currency pairs.

Free Unlimited Demo Account.

76.4% of retail accounts lose money.

Forex.com are a leading forex broker. Offering the largest range of currency pairs (80+) and some of the tightest spreads in the industry.

69% of retail accounts lose money with this provider.

Markets.com offer CFDs across a huge range of assets from shares and indices to commodities and cryptocurrencies.

CFDs carry risk.

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64% of traders lose.

XM.com deliver ultra low spreads across a huge range of Forex markets. Flexible lot sizes, and Micro and XM Zero accounts accommodate every level of trader.

68.15% of retail accounts lose money.

Trading 212 Offer a truly mobile trading experience.

With tight spreads and a huge range of markets, they offer a dynamic and detailed trading environment.

80% of retail accounts lose money.

AxiTrader offers competitive spreads on a large range of Forex and CFD markets, integrated into the MetaTrader 4 platform.

FCA and ASIC regulated.

68.5% of retail investor accounts lose money when trading CFDs with this provider

IG offer spread betting, CFD and Forex trading across a range of markets.

They are FCA Regulated, boast a great trading app and have a 40 year track record of excellence.

76% of retail investor accounts lose money when trading spread bets and CFDs with this provider.

eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs. 75% of retail CFD accounts lose money. You should consider whether you can afford to take the high risk of losing your money.

75% of retail investor accounts lose money when trading CFDs with this provider.

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You should consider whether you can afford to take the high risk of losing your money.

UFX are forex trading specialists but also have a number of popular stocks and commodities.

Offering tight spreads and one of the best ranges of major and minor pairs on offer, they are a great option for forex traders.

73.2% of retail accounts lose money with this provider.

Ayondo offer trading across a huge range of markets and assets.

They also offer negative balance protection and social trading.

77.2% of retail accounts lose money with this provider.

24Option deliver a high quality forex trading service, with over 45 currency pairs and variable spreads from just 3 pips.

86.24%% of retail accounts lose money with this provider.

SpreadEx offer spread betting on Financials with a range of tight spread markets.

AUD/USD Trading Positions

Popular award winning, UK regulated broker.

68% of retail spread betting accounts lose money with this provider.

Avatrade offer 50+ currency pairs and their spreads are some of the best among any broker. They are regulated across 5 continents.

71% of retail accounts lose money with this provider.

XTB are an FCA regulated brand offering CFD and Forex trades.

They offer 3 levels of account, Including Professional.

77% of retail accounts lose money.

A regulated bank, Saxobank offer CFD, Stocks and Forex trading on 35,000+ markets via the SaxoTrader Pro and SaxoTrader Go platforms

72% of retail accounts lose money.

Investous offer Forex trades from 0.01 lots, and with spreads of just 0.01 pips (variable).

See if this new brand could work for you.

82.11% of retail accounts lose.

BDSwiss offer 250+ Shares, Indices, Forex, Commodities and Cryptocurrencies markets via CFDs. With spreads from 1 pip and an award winning app, they offer a great package.

78.3% of accounts lose money when trading CFDs.

Bearish EUR/USD

Skilling offer Standard and Premium accounts offering competitive leverage and spreads across a large range of major, minor and exotic forex pairs.

73% of retail CFD accounts lose money.

FXTM Offer forex trading on a huge range of currency pairs.

Spreads can be as low as 0.1 with the ECN Account types.

83% of retail accounts lose money.

Multi-Award winning broker. Specialising in Forex but also offering stocks and tight spreads on CFDs and Spread betting across a huge range of markets.

77% of retail accounts lose money with this provider.

FXCM are an FCA regulated, London based broker. Companies under the FXCM umbrella are also regulated in Australia and Canada.

73.62% of retail accounts lose.

Capital.com offer 68 Forex pairs for trading.

All have competitive spreads.

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The firm also ensure negative balance protection.

76.2% of retail accounts lose money.

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Chart

Breaking Down ‘AUD/USD’

Before we get into the details, what precisely does AUD/USD mean?

Quite simply, the exchange rate tells you how many US dollars (quote currency) are required to purchase one Australian dollar (base currency).

The AUD/USD cross is now the fourth most actively traded currency pair. In recent years, the AUD/USD has seen months where it represents around 7% of total forex market turnover. However, it is not one of the six that form the US dollar index (USDX).

Why Day Trade AUD/USD?

Before we consider AUD/USD day trading strategies and fundamental analysis, why should you opt for this particular currency pair when there are so many options currently available?

  • Volatility – As a result of the high-interest rate differential between Australia and the US, day traders can benefit from high levels of both volume and volatility.

    This could mean greater opportunities to turn profits. In bull markets, the AUD/USD pair run upwards much quicker than other pairs, whilst in bearish market environments, it can drop much sooner.

  • Major currency performance – In recent years the Australian dollar has become the highest performing major currency.

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    It has seen an increase of in excess of 30% over the US dollar.

  • Economic stability – Data has shown the Australian economy has surged through exports and commodities, whilst retaining a solid foundation with a central bank. The Australian economy has even managed to grow year-on-year, whilst other economies have suffered at the hands of a global economic downturn.
  • Trading relations & GDP – The trading relationship with China allowed the Australian economy to avoid the global financial crisis.

    Plus, Australian GDP is on the rise. All of this makes investing in these powerhouse economies an attractive proposition.

  • Diverse trading vehicles – Due to the AUD/USD’s increasing popularity, individuals can benefit from a number of different trading vehicles, from ETFs to E-micro futures, options, and more.
  • Availability of resources – Daily and weekly analysis is far easier today thanks to the range of resources available.

    Websites and forums offer market overviews and analysis. Sophisticated live streaming charts and graphs are now highly customisable. You can get bespoke indicators, 1-minute, 5-minute, 15-minute, and 1-hour charts, plus conduct straightforward Elliott wave analysis.

Drawbacks/Risks

Despite AUD/USD statistics demonstrating promising growth and attractive trends, there remain several drawbacks and risks to trading with this currency pair.

  • Stability misconception – Traders often take for the granted the power and stability of US economy over other economies, such as Australia.

    However, because this is a cross pair, you need to ensure you analyse both economies against each other.

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    Not keeping up-to-date with political and economic sentiments in both could lead to costly mistakes.

  • Volatility – Part of the allure of the AUD/USD currency pair is the promise of volatility.

    However, these sharp moves can also lead to significant losses. So, if you do invest substantial capital into this pair, one of the top trading tips is to employ an effective money management system.

  • Leverage risks – Trading on margin allows you to borrow funds to maximise your position.

    But whilst this may bolster potential profits, it could also amplify losses.

  • Automated competition – You may have attractive bid-ask offer spreads and all the bar charts and graphs in real time in front of you.

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    However, you are now competing with more sophisticated trading algorithms than ever before. This means asserting an edge when you’re live chart investing is increasingly difficult.

Influences on Movement

By reviewing AUD/USD relationship through long-term data, it is clear there are several main factors that influence prices. These include:

Commodities & Trading

  • Commodity prices – The Australian economy, to a certain extent is shaped by their significant role in commodities.

    Definition of "AUD" in Forex Trading

    They are the largest coal and iron ore exporter. So, when commodity prices rise, the Australian dollar often strengthens. When there is a fall in the price of commodities, the Australian dollar weakens.

    This was demonstrated in 2015 when commodity prices slumped and the Australian dollar fell by over 15% against the US dollar. In fact, it almost reached parity against the New Zealand dollar (NZD), which has not happened since the 1970s.

  • Trading relations – This is particularly important for the Australian dollar.

    The Australian economy is closely linked to trading relationships in Asia. So, changes in commodity demand from China, India, and to some extent Japan, can all cause the strength of the Australian dollar to increase or subside.

Other Influences

  • Interest rate differential – Interest rate decisions laid out by both the Federal Reserve (Fed) and the Reserve Bank of Australia (RBA) can impact AUD/USD rates and prices.

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    For example, the Australian economy is currently performing well, so the Australian dollar looks set to continue increasing in value.

  • Economic indicators and data – Price action often centres around the release of key economic data and indicators. So, news announcements and reports on GDP, retail sales, inflation, trade balances, and industrial production, can all trigger movement in the AUD/USD currency pair.
  • Inflationary pressures – Normally, high commodity prices create recessionary pressures on developed nations.

    This can lead to concern over the sustainability of economies in North America and Europe, for example. When this happens, the Australian economy emerges as a beacon of hope, which again can strengthen its currency’s value.

  • Political announcements & natural disasters – Major political elections, new policies, wars, terrorist incidents, plus natural disasters, can all lead to serious fluctuations within the AUD/USD.

So, whilst day trading the AUD/USD pair calls for technical analysis via daily, weekly, and monthly price charts, it also demands an understanding of the underlying economic forces at play.

Currency Correlations

Part of your AUD/USD trading view also needs to take into account relevant currency correlations.

Currency pairs do not move independently of each other.

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The success and failures of certain pairs will influence others.

Correlation is actually a statical measure, ranging from -1 to +1.

Which side of ‘0’ correlation will fall depends on whether the pair is positively or negatively correlated. Correlations can also change over time.

  • Positive correlation – This is simply when pairs move in tandem with each other. The AUD/USD, GBP/USD, and EUR/USD FX pairs are positively correlated. This is a result of the US dollar being the counter currency. So, all pairs will reflect changes in the US dollar.
  • Negative correlation – This is when forex pairs move in the opposite direction.

    For example, USD/CHF, USD/JPY, and USD/CAD pairs.

    AUDCAD Forex Chart

    This is because the US dollar is the base currency.

Note the correlation with the USD/CAD pair may also be partly attributed to the positive correlation between the Australian and Canadian economies, as both are heavily involved in commodity exports.

Gold Correlation

Another important area is AUD/USD correlation with gold. Gold has a positive correlation with AUD/USD. So, when gold is going up, AUD/USD goes down.

When gold goes down, AUD/USD goes down.