Why Trade AUD As A Forex Investor?


All forex traders should try trading the Australian dollar (ISO code: AUD). It’s a good counterbalance to any EUR-pair hangover. It features “giant pandas” (the code word for the People’s Bank of China) defending option barriers almost at any cost. It has monster Japanese corporations swooping in for the import-related kill of a lifetime. You may have to stay up all night listening to the latest speech of a central bank chairman of another country (simply because you are in an AUD/USD forex trade). And, you will have to remember to never launch a forex trade on your Friday (because it’s already Saturday in “Oz”). So, as they say down under, “Give it a burl.”

Nonetheless, go slow in the beginning. Keep your leverage ratio under 50:1. Trade 1 contract at a time. Open and close a forex trade when either Sydney is open or London is open. Start out with AUD/USD; avoid the AUD/NZD like the plague. Watch a global economic calendar for all AUD-related events, including all (usually illiquid) national holidays.

Why Trading AUD Is A Positive Choice For Forex Investors

Within the world of forex, trading AUD-related currency pairs forms the fifth largest liquidity pool. In addition, now that the International Monetary Fund has designated the AUD as a “reserve currency”, this pool should grow and deepen in the coming years. When you combine these facts with the relatively hawkish interest rate policies of the Reserve Bank of Australia (the central bank of Australia), you can enter into financially lucrative “positive interest rate” carry positions by being long certain AUD currency pairs (such as AUD/JPY or AUD/USD). If most of your investment portfolio consists of European or North American equities or bonds, investing in the AUD represents a good counterbalance (that has almost no correlation to such traditional investment vehicles).

Lowering Risks Forex Trading AUD

Forex beginners can lower their risks, while trading the AUD, by not using too much leverage (in other words, do not go higher than a 50:1 leverage ratio on any trade) and keeping the number of contracts traded, at one time, down as low as possible. Since the AUD/USD has the largest forex trading volume of all AUD-related pairs, learning the AUD ropes is best done in that neck of the woods. Spreads are usually the tightest when Sydney is open for business; if this wrecks your beauty sleep, go for mornings in London. Stay away from entering or exiting a forex trade on any Friday (as that is already Saturday in Australia) and liquidity can be an issue. No holiday forex trading, either!

Keeping On Track With AUD Movements As A Forex Investor

If you pull up a bunch of weekly AUD-related charts, you should see that this is a currency that likes to trend in multi-week swings. In 2013, two significant events have happened that make watching those swings pretty easy to do. First, the economic policies of Japanese Prime Minister Abe are destroying the value of the Japanese yen. This means that the AUD/JPY is based on an increasing less valuable JPY – until there is a change of command at the top of the Japanese government. Secondly, the US Federal Reserve’s decision to start exiting its “QE” policies has put a rising floor under the US dollar. This means that the tail of the AUD/USD is beginning to wag the dog.


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