Trading a currency pair entails understanding how one currency reacts to another. In this case, what’s being looked at is the ratio of the Australian dollar and the US dollar, which involves monitoring the interest rates between the Reserve Bank of Australia (RBA) and the US Federal Reserve.
The notation AUD/USD refers to the Australian dollar and US dollar currency pair. The pair is included in “The Majors”, a group of the most commonly traded currencies in the world, which generates up to 85% of the global forex trading market. To be included in this exclusive group means there is rapid movement in price changes due to the huge amount and high volumes of these currencies being exchanged.
The Australian dollar is also called the “Pacific Peso” because not only that it is the base currency of Australia, but also of the nations under her Commonwealth. Australia is one of the largest island nations in the Pacific, with far-reaching influences that creates an impact on the global economy, particularly in the currency movement. The global economic picture is not complete without one of its major shaker and mover that is the United States. It has always been one important figure that, similarly, exerts influence in the global markets.
Why Trade the AUD/USD Currency Pair?
The AUD/USD is popular in the Asia Pacific, the UK and Australia. It is part of the forex group and many are looking into trading the currency pair more and more. There is high demand for it primarily for these two reasons:
• A stable Australian government and economy
• Limited intervention from the Australian government and the RBA
This pair is also being dubbed as a commodity currency pair because its performance relies heavily on the Australian commodities market. Australia is a large producer of gold and oil, which typically makes the Aussie correlate strongly with the price of the two commodities.
On the whole, the AUD works closely with the global economic growth. And because the quote currency of the AUD/USD pair is in US dollars, there tends to be an inverse relationship between the two. When trading with the pair, remember that there is less liquidity and that surprising reversals often occur. Just the same, expect volatility to happen any time.
If you like to trade this pair or other currencies, we recommend that you only choose a trusted and regulated brokerage like AvaTrade.