Past Performance: Past Performance is not an indicator of future results.
The currency pairing of the Australian dollar (AUD) and the United States dollar (USD) is one of the most commonly traded pairs on the forex market. From a volume-traded perspective, both are classified as major global currencies. Commonly referred to as the Aussie, the AUD/USD is considered to be a commodity currency pair. Also known as commodity dollars or "comdolls," commodity pairs involve countries that produce, import or export large quantities of raw goods. In the case of the AUD/USD, the commodity that serves as a catalyst for exchange rate valuation is gold.
Retrieved 03 Jun 2020 https://stats.bis.org/statx/srs/table/d11.3 | |
Retrieved 03 Jun 2020 https://www.gold.org/goldhub/data/gold-production-by-country | |
Retrieved 03 Jun 2020 https://www.worldstopexports.com/gold-exports-country/ | |
Retrieved 03 Jun 2020 https://www.rba.gov.au/statistics/cash-rate/ | |
Retrieved 03 Jun 2020 http://www.tradingeconomics.com/united-states/interest-rate | |
Retrieved 03 Jun 2020 https://stats.bis.org/statx/srs/table/d11.3 | |
Retrieved 03 Jun 2020 https://www.australian-coins.com/australian-decimal-changeover/c-day-14th-february-1966-from-pounds-to-dollars-decimal-changeover-day/ | |
Retrieved 03 Jun 2020 https://www.aljazeera.com/economy/2019/9/30/us-dollar-share-of-global-currency-reserves-at-six-year-low | |
Retrieved 03 Jun 2020 https://howmuch.net/articles/the-world-economy-2018 | |
Retrieved 05 Jan 2021 https://www.rba.gov.au/statistics/cash-rate/ |
The currency pairing of the Australian dollar (AUD) and the United States dollar (USD) is one of the most commonly traded pairs on the forex market. From a volume-traded perspective, both are classified as major global currencies. According to the International Bank of Settlements Triennial Survey 2019, the USD is ranked as the most frequently traded currency in the world with an average daily turnover accounting for 88% of the total forex handle. The AUD ranks fifth, responsible for 7% of average daily turnover.[1]
Commonly referred to as the Aussie, the AUD/USD is considered to be a commodity currency pair. Also known as commodity dollars or "comdolls," commodity pairs involve countries that produce, import or export large quantities of raw goods. There are three major commodity dollars on the forex: AUD/USD, USD/CAD, NZD/USD. The associated commodities are gold, crude oil and dairy products. Generally, as prices of these items fluctuate, the AUD, CAD and NZD may post either a bullish or bearish breakout versus the U.S. dollar.
In the case of the AUD/USD, the commodity that serves as a catalyst for exchange rate valuation is gold. Both the United States and Australia play a key role in the global production of gold. For the year ending 2018, Australia ranks second in gold production with a total output of 314.9 metric tons. The United States comes in fourth globally, with production of bullion totalling 221.7 metric tons.[2] In addition, the United States is the world's fifth-largest exporter of gold (US$17.2 billion, 5.8% annually), while Australia is the sixth-largest global exporter (US$16.2 billion annually).[3]
It's important to recognise that the impact of gold pricing is very different on each currency. In respect to USD, gold has an inverse relationship. Conversely, an appreciating value of AUD is positively associated with robust gold pricing. The conventional wisdom is that AUD/USD exhibits a long-term positive correlation to the price of gold. When the correlation is strong, forex traders apply technical analysis to gold to determine overall market state. A prevailing bullish or bearish trend in bullion is a key factor in whether or not to buy or sell the AUD/USD.
In addition to being commodity driven, AUD/USD has been a vehicle by which to execute a carry trade. A carry trade is one in which an individual borrows money at a low interest rate and reinvests the borrowed capital in an asset that will provide a larger return. Amid prolonged uncertainty, as created by the COVID-19 pandemic and Brexit, many forex participants placed carry trades to mitigate heightened systemic risk.
Historically, AUD has been a prime candidate for currency carry trades, because the Reserve Bank of Australia typically holds higher interest rates than those of other developed countries.
2020 proved to be a challenging year for the global economy. Subsequently, central banks around the world implemented intermediate-term dovish monetary policies. For example, for 7 May 2020 the AUD had a cash rate of 0.25%[4] while the United States Federal Reserve had installed a rate of 0.0% upon the USD.[5] Although these values were historically low due to the coronavirus pandemic, interest rates of the AUD remained marginally higher than those of the USD. Although the Australian dollar only offered a marginally better rate-of-return than the U.S. dollar, the AUD/USD exchange remained a vehicle for investors interested in executing carry trades. In fact, many institutional investors preferred executing the Aussie carry trade instead of trying to pick bottoms in the FTSE 100, CAC 40 or the NASDAQ.
Throughout 2020, the near-zero interest rate environment became a staple of the international monetary system. In fact, as coronavirus cases rose toward year's end, both the Reserve Bank of Australia (RBA) and Fed held interest rates at historic lows. For November 2020, the U.S. federal funds target rate fell between 0.0% and 0.25%, while the RBA promoted a 0.10% cash target rate.[12] Although the COVID-19 pandemic negatively impacted economies around the globe, the AUD/USD currency pair continued to be a viable carry trade alternative.
Traders and investors are attracted to AUD/USD for several reasons.
No matter which style of market participation is preferable, AUD/USD is a prime candidate for active trade.
Last updated on 5th January 2021.
Retrieved 03 Jun 2020 https://stats.bis.org/statx/srs/table/d11.3 | |
Retrieved 03 Jun 2020 https://www.gold.org/goldhub/data/gold-production-by-country | |
Retrieved 03 Jun 2020 https://www.worldstopexports.com/gold-exports-country/ | |
Retrieved 03 Jun 2020 https://www.rba.gov.au/statistics/cash-rate/ | |
Retrieved 03 Jun 2020 http://www.tradingeconomics.com/united-states/interest-rate | |
Retrieved 03 Jun 2020 https://stats.bis.org/statx/srs/table/d11.3 | |
Retrieved 03 Jun 2020 https://www.australian-coins.com/australian-decimal-changeover/c-day-14th-february-1966-from-pounds-to-dollars-decimal-changeover-day/ | |
Retrieved 03 Jun 2020 https://www.aljazeera.com/economy/2019/9/30/us-dollar-share-of-global-currency-reserves-at-six-year-low | |
Retrieved 03 Jun 2020 https://howmuch.net/articles/the-world-economy-2018 | |
Retrieved 05 Jan 2021 https://www.rba.gov.au/statistics/cash-rate/ |
When executing customers' trades, FXCM can be compensated in several ways, which include, but are not limited to: spreads, charging commissions at the open and close of a trade, and adding a mark-up to rollover, etc. Commission-based pricing is applicable to Active Trader account types.
Leverage: Leverage is a double-edged sword and can dramatically amplify your profits. It can also just as dramatically amplify your losses. Trading foreign exchange/CFDs with any level of leverage may not be suitable for all investors.
Risk Warning: Trading Margin FX/CFDs carries a high level of risk, and may not be suitable for all investors. Leverage can work against you. By trading, you could sustain a total loss of your deposited funds but wholesale clients could sustain losses in excess of deposits.
Exchange: ${getInstrumentData.exchange}
${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.