Aussie dollar and the US dollar: a matched pair?

  • By Author

  • September 4, 2018
  • 1:44 am BST

The pair often referred to as the “Aussie Pair” is a combination of the US Dollar and the Aussie Dollar. It usually sparks tremendous amounts of interest in the market. Its performance depends on the market in China and the commodity market. The ties with China arise from the fact that a huge portion of Australian exports go to that country. Australia is a major producer of coal, iron and gold, which are classed as commodities; any movement in commodities plays a vital role in how the market moves as far as the AUD is concerned.

There are several factors to take into consideration when trading in the pair, and they should be carefully weighed before any moves are made. The pair is known for its volatility in the face of several different pieces of data and information. Take care when selecting an expiration or closing date for your trade. The impact of the relations between Australia and China on the economy is so big that Chinese data cannot be ignored. Consider the interest rate decisions taken at the central banks. While the US Federal Bank meets every six weeks, the Reserve Bank of Australia meets on a monthly basis.

Australian economic releases

It is vital to keep abreast of what is happening in the Chinese market and how the economy is faring. Be aware of how commodities such as gold, copper and iron are trading. The strong ties between the two countries will affect the performance of the AUD/USD. The purchasing manager index releases are sub-divided into three sectors: manufacturing, services and construction. Releases below the 50 level indicate the onset of a possible recession and trouble ahead, while releases above the 50 level indicate conditions that are bullish in nature. The GDP and employment data is another vital cog in the workings of the economy.

US economic releases

The United States of America has the largest economy in the world. Each month, a huge amount of economic news is released that can influence trade performance. The pieces of data that really matter where the dual-mandate Federal Reserve Bank is concerned are the rate of inflation and the jobs data information. This does not mean, however, that they are the only pieces of information that should be considered. Other snippets of economic releases must be paid due attention. Institute for Supply Management Manufacturing and Non-Manufacturing, Retail Sales, GDP, Producer Price Index, Private Payrolls and Durable Goods Orders should all be equally investigated before making a decision or formulating your trading strategies.

Predicting market moves according to economic releases

When the Consumer Price Index is released, you can expect the market to move at its fastest. This particular event is one that affects the movement of the central bank when it comes to interest rates. The Reserve Bank of Australia meets on a monthly basis to access the state of the Australian economy. Volatility related to interest rate decisions can be expected.

The Reserve Bank of Australia, much like any other major financial institution in the world, is mandated to a 3% inflation band. If released inflation does not come close, the banks will do what they have to in order to fulfil the mandate. Consumer spending is what drives the economy, so Retail Sales are a good indication of the strength of the economy. GDP is vital in any economy and must be carefully attended to.

Understanding how to achieve a successful analysis of the fundamentals in the market is vital for those who wish to see growth in their trades and take full advantage of the opportunities presented. Seek forex advice and tips and tricks of the market using online resources and books to help you make the best decisions.