What moves aud??

AUD moves are heavily influenced by Gold Prices and the Reserve Bank of Australia (RBA) Monetary and Fiscal Policy.

Several factors affect the value of AUD but we shall discuss the major ones.

MAJOR ECONOMIC data that moves the AUD

The main data that moves the AUD (Australian dollar) include;

1. Interest rates.

The interest rate decisions by the RBA greatly affect AUD.

When trading AUD, its important to consider the economic  news release on domestic economic data and interest rate adjustments.

The interest rate differentials has put the AUD to a higher advantage compared to other currencies with low interest rates.

Most traders and investors chase AUD for its higher yield or a return.

You are able to borrow money from a low interest rate environment  and invest it in a high interest.

Foreign investors buy the AUD in order to take advantage of the yield differential.

2. Gold prices

 Gold is considered to be a safe haven by investors since it does not lose its intrinsic value.

During the times of economic crisis,

Most investors move their investments into gold and this may result to hiking of gold prices.

Since Australia is one of the major producers of Gold, an increase in demand for gold leads to high demand for AUD hence strong economy(AUD).

On the other hand, during times of stable economy investor sell gold to invest in high yielding instruments.and this may lead to a fall in prices as well as AUD

3. National GDP

National GDP measures the economic well being of the country’s economy. This highly moves the AUD.

When the country is doing good,  GDP is positive.  This indicates a strong AUD

On the contrary, when the change in GDP is negative or falls, it indicates a collapsing economy hence weak AUD.

4. Retail sales;

 This measures the total value of sales at the retail level.

It tracks the level of  consumption by looking at how much of the domestic product  is sold and consumed per month.

You can use retail sales to determine the countries GDP and track inflation.

A high value on retail sales may reflect a high countries GDP hence strong AUD.

The RBA uses this index to measure the changes in the general price level of consumer goods and services.

5. Unemployment rate

This helps the government to track the number of people in Australia  that are out of employment/ not working.

Unemployment reduces the level of consumption and increase burden for the government to provide for its citizens.

As a result, government expenditure increase and may lead to increase in national debt.

It also reduces tax revenues to the government and reduces people’s confidence to spending.

A high unemployment rate is a sign of poor economy and a weak AUD.

With low unemployment rate the Australia’s economy is strong and so the AUD.

6. Industrial productions.

Australia’s economy is widely backed up by its industrial production and is the power to Asia’s industrialization and agricultural commodities.

It’s the world’s leading producer of gold, iron ore and uranium and the world’s second largest LNG exporter.

A reduction in prices of its exports threatens the AUD value and the economy at large.

The production data can also be used to measure the country’s producer price index (PPI) which show the changes in the costs of production.

7. China’s economy.

 China is the biggest exporter of Australian products due to its high demand for its resources like coal and iron ore.

For it to buy Australian product, it must first exchange its currency to Australian dollar which increases the demand for AUD hence strengthening the AUD.

A decline in the Chinese economy greatly affects the Australian dollar when demand for its products reduces.

Last but not least,

Australia is well positioned as a trade and investment base for international companies doing business with Asia.

8. Trade balance

Trade balance shows the relationship between the countries exports and imports of the country.

When the exports are greater than the imports, it means more of AUD is demanded and hence health economy.

When the imports value is greater than the export it shows that less of AUD is demanded and more is supplied leading to a deficit hence a weak economy.

Trading AUD/USD

 AUD/USD is positively correlated to Gold.

When gold prices are going up, AUD strengthens.  Therefore it gives a good signal to buy AUD/USD.

You can also take advantage of the important news release from economies that affect the Australia’s  economy.

These the major Australia’s trading partners; China USA and New Zealand.

Buy AUD/USD when the AUD is appreciating in value and sell AUD/USD when AUD falls in value.

AUSSIE AS A COMMODITY CURRENCY

Due to Australia’s most dependence on its natural resources and agricultural products, the AUD/ Aussie and commodity prices have a positive correlation.

They mostly produce; gold, oil, iron ore, wheat and wool.

As commodity prices tend to increase, AUD appreciates following the increase in value of prices and vice versa.

In fact, Australia is the one of the biggest producers of gold in the world.

Therefore gold prices highly affect the Aussie currency during times of price fluctuations

As prices of gold rise, AUD follows , when gold prices fall, AUD also takes the footsteps .

For instance, the AUD’s fall from $1.10 to 70 US cents was largely due to the end of the  mining boom in 2002.

Since then,

The Australian dollar remained relatively strong due to its interest rate being comparably higher than the other currencies.

Carry trade.

AUD is also among the most traded currency on the Forex market .

Due to its high interest rates, Aussie is one of the best candidates in carry trade best paired with the Japanese yen.

Carry trade is when you sell a currency with low interest rate to buy a currency with a high interest rate.

You gain from interest rate differentials.

Right Session to trade AUD 

The Australian dollar makes significant movements during the Asian trading session.

It starts from 7pm to 4 am EST.

It is during this period that AUD makes strong movements because it’s the same time when economic data news from Australia are released.

This makes it a good time to trade the AUD/JPY,GBP/JPY.

During this period,

You will take advantage of the overlap session between Asian session and the London session between 3am and 4 am.

Australia facts and figures

•  Country Name:   Common Wealth Australia
• Short Form: Australia.
• Government Type: Federal Parliamentary Democracy, Under Constitutional Monarchy
• Capital: Canberra
• Independence: 1^st January 1901
• Neighbors:   New Zealand, Papua New Guinea, Indonesia.
• Location: Between Indian Ocean and Pacific Ocean
• Head of state: Queen Elizabeth II
• Prime Minister; Scott Morrison
• Nick names:  Aussie,  Menzies, buck, dough.
• Central bank: Reserve Bank Of Australia
•  Imports: $203.1 billion
• Exports: $184.3 billion
•  Website: https://www.australia.gov.au
• Major Cities : Sydney, Melbourne, Brisbane, Perth, Adelaide, Gold Coast, Canberra, Newcastle, Wollongong, Logan City

MONETARY & FISCAL POLICY moves the aud

The  Reserve Bank of Australia (RBA) and other regulatory committee use monetary policy and fiscal policy to determines the size and the growth rate of money supply.

Its main objectives ;

1. To keep interest rates stable
2. To maintain full employment and improve economic development.

RBA aims to maintain inflation between 2-3% on average over the economic cycle to achieve its objectives of maintaining a stable economic growth.

The Australian central bank controls inflation by;

• Adjusting interest rates
• Using open market operations through trading government financial securities.

When demand for domestic products is low,

The government loosens monetary policy and cuts interest rates to make spending cheap.

However,

If demand pressure is very high, the RBA tightens monetary policy and raises interest rates to reduce spending.