AUD/USD Technical Analysis

AUDUSD

The AUD/USD pair is in a downtrend and pushing against a key Fibonacci support level at 0.6855. Technical indicators indicate a rapid decline, and a break below this level suggests further downward pressure. The 20 SMA has accelerated its decline, and its trendline is converging with the 0.6960 Fibonacci resistance level. In addition, the AUD/USD has formed an inverted head-and-shoulder pattern that suggests a bullish reversal.

Trading AUD/USD requires knowledge of fundamental economic data. The currency pair is most volatile during the trading hours in Australia and the US, which overlap with the Asian trading session. Major economic releases, such as US non-farm payrolls, the unemployment rate, and retail sales, can trigger big shifts in the AUD/USD.

The Australian economy is a key driver for the AUD/USD currency pair. The country’s economy has performed well year-on-year since 2001. Despite the global financial crisis, the Australian economy has only faced one setback since that time. However, a strong reversal trend could result in substantial financial losses.

While the AUD/USD currency pair has high liquidity, it is also characterized by high volatility. As a result, traders should employ a strong money management system if they have substantial capital to invest. Besides, the AUD/USD currency pair tends to fluctuate wildly and it’s vital to keep an eye on monetary policy and interest rates. Additionally, news and technical analysis are crucial for AUD/USD trading.

Interest rate divergence may narrow over the mid and long term. The Federal Reserve has committed to increasing borrowing costs this year, after the conclusion of its Quantitative Easing program. However, the Reserve Bank of Australia has kept a neutral stance. Thus, a rise in borrowing costs would reduce the carry trade potential of the two currencies.

Trade relations between Australia and the US are one of the biggest influences for the AUD/USD currency pair. Both countries have strong economic ties and have been reliable trade partners for years. Following the Australia-US Free Trade Agreement in 2005, exports of US goods to Australia grew by 91% in five years.

Australia is one of the world’s largest exporters of commodities and its economy is strongly correlated with commodity prices. The value of the AUD/USD pair is therefore closely tied to global demand for these commodities. Furthermore, the Aussie is the fourth-most-traded currency pair, accounting for 5.2% of forex trade.

In the past year, the Australian dollar appreciated against the USD. Since Australia is an exporter of coal and iron ore, the AUDUSD currency is highly dependent on commodity prices. However, in 2015, the price of these commodities plunged, putting pressure on the Australian dollar. In addition, investors typically flock to safe-haven currencies during periods of economic uncertainty.

The AUDUSD and gold have a strong correlation. The AUD/USD rises when gold rises, while it falls when gold prices fall. It’s also correlated with the Swiss franc. The Swiss franc is the second largest gold exporter, and its value increases whenever gold prices rise. A strong correlation between the two currencies also means that buying gold will generally result in strong AUD/USD movements.

The AUD/USD pair’s high volatility is an important feature of this currency pair. It is the fourth most traded currency pair in the forex market, and its high volatility encourages traders. Moreover, it is correlated with NZDUSD, USDCAD, and gold. Positive correlations mean that the two currencies mirror each other’s price action, while negative correlations indicate that the opposite is true.