🇦🇺 What is AUD/USD?
AUD/USD is the Australian Dollar against the US Dollar, representing a major commodity currency pair. It's closely correlated with commodity prices, especially gold and iron ore, making it essential for fundamental analysis and understanding commodity-currency relationships.
Introduction to AUD/USD
AUD/USD is a popular currency pair known for its correlation with commodity prices and its role as a risk currency. It's sensitive to global economic growth and commodity demand, especially from China.
Why Trade AUD/USD?
- Commodity Correlation: Tied to gold and iron ore prices
- Risk Currency: Strengthens in risk-on sentiment
- High Volatility: Significant price movements
- Clear Trends: Strong directional moves
- Trading Opportunities: Good for day trading and swing trading
AUD/USD Characteristics
Volatility
- Average Daily Range: 60-100 pips
- Volatility: Moderate to High
- Best for: Day trading and swing trading
- Risk: Moderate to High
Trading Hours
- Most Active: Sydney and New York sessions
- Sydney Session: 22:00-07:00 GMT
- NY Session: 13:00-22:00 GMT
- Overlap: Limited
AUD/USD Trading Strategies
Strategy 1: Commodity Correlation Trading
Best For: Trading based on commodity prices.
How to Trade:
- Monitor gold and iron ore prices
- Enter AUD/USD in correlation direction
- Gold up = AUD/USD up (generally)
- Use proper risk management
- Exit when correlation breaks
Strategy 2: Risk-On/Risk-Off Trading
Best For: Trading based on market sentiment.
How to Trade:
- Risk-on sentiment = AUD/USD rises
- Risk-off sentiment = AUD/USD falls
- Monitor geopolitical risks
- Enter based on sentiment shifts
Strategy 3: Trend Following
Best For: Trend following strategies.
How to Trade:
- Identify trend using moving averages
- Enter on pullbacks using Fibonacci retracements
- Use trendlines for confirmation
- Target: Trend continuation
Key Economic Factors
Australia Factors
- RBA Policy: Interest rate decisions
- Commodity Prices: Gold and iron ore
- China Demand: Major export destination
- GDP: Economic growth
- Employment: Australian employment data
US Factors
- Fed Policy: Interest rate decisions
- NFP: Employment data
- GDP: Economic growth
- Risk Sentiment: Global market sentiment
Best Timeframes for AUD/USD
Day Trading
- Primary: M15, H1
- Hold Time: Hours
Swing Trading
- Primary: H4, D1
- Hold Time: Days to weeks
AUD/USD Trading Checklist
Before trading AUD/USD:
- [ ] Trading session identified (Sydney/NY)
- [ ] Commodity prices checked (gold, iron ore)
- [ ] Trend or range identified
- [ ] Support/resistance levels marked
- [ ] Economic calendar checked (Australia and US)
- [ ] Risk sentiment assessed
- [ ] Stop loss set
- [ ] Take profit set
- [ ] Risk/reward ratio at least 1:2
- [ ] Position size calculated using risk management rules
Common AUD/USD Mistakes
- Ignoring Commodity Prices: Strong correlation with commodities
- Ignoring Risk Sentiment: Risk currency characteristics
- No Stop Loss: High risk
- Wrong Timeframe: Using inappropriate charts
- Overtrading: Too many positions
Summary
AUD/USD is a commodity currency pair with strong correlations to gold and iron ore prices. Success requires understanding commodity relationships, risk sentiment, and proper risk management.
Key Takeaways:
- Correlated with gold and iron ore
- Risk currency (strengthens in risk-on)
- Monitor commodity prices
- Trade during Sydney/NY sessions
- Understand risk sentiment
- Always use proper risk management