The Australian to US dollar (AUD/USD) pair, also known as the ‘Aussie,’ is a significant forex pair that accounts for about 5% of total forex market volume. Due to the interest rate differential between the two currencies, day traders can sometimes see significant volume and volatility levels.
The base currency is the Australian dollar, whereas the quote currency is the US dollar. It means that the AUD/USD rate is the amount of US dollars one Australian dollar will buy at any given time. Due to the Australian commodities boom after 2000, the AUD/USD currency pair has grown in prominence in recent years. This currency combination links two robust and developing economies. Individuals can trade the Australian dollar to US dollar pair using either a forex contract or a contract for difference (CFD) on a specific currency pair, speculating on the price difference. (A CFD is a financial instrument in which one party agrees to pay the other the difference in security value between the start and end of a trade, often between a broker and an investor.)
For starters, it’s one of the most important currency pairs in the Forex market. It indicates that it is one of the top six markets in terms of volume. It suggests that there are a lot of orders in the market, which keeps it nice and liquid and allows you to get in and out quickly. It also has a relatively narrow spread, which means the gap between the price buyers are ready to pay and the amount sellers are willing to sell for is usually relatively tiny. It means that it’s suitable for both day trading and long-term positioning.
Furthermore, Australia has a large and well-known economy. When it comes to an economy like Australia’s, it’s relatively simple to figure out what drives it ahead. When you have a well-developed economy like Australia and the United States, you have simple access to economic data and plenty of study opportunities. If you wanted to trade any more unusual currencies, you might have trouble collecting enough financial data to figure out what’s driving them. Trading is significantly easier if you stick to the major marketplaces.
Here are some trading characteristics of the AUD USD pair:
- Trading hours: except for weekends, the pair trades all day but is most active during the Pacific, Asian, and American trading periods. Australia releases major economic news that can influence the pair during the Pacific and Asian sessions, whereas the USD’s influence explains the activity during the American session.
- The pair’s volatility is modest, with most changes ranging from 50 to 70 points. However, when stock markets are plunging in a crisis, volatility can quickly escalate to 100-200 points each day.
- The pair is a popular major with a low spread due to significant demand and liquidity. The space for popular ECN accounts is usually less than one point.
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