The AUDUSD, or the “aussie” pair, as it is also being known, is quite an interesting currency pair. It is highly dependent on what is happening on both the commodity markets and in China in general. The connection with the Chinese economy is quite strong because almost one third of all Australian exports are going to China so any moves into expansionary or recessionary territory in China should make the aussie pair travelling.
Commodities are highly important as well as Australia is a big producer of gold, coal, iron, etc, so what is happening on the commodities markets plays an important role for the Australian economy and the Australian dollar implicitly.
The things to consider when trading the audusd pair are:
- it is a highly volatile pair as it is dependent on many pieces of data information. This means you should look carefully what expiration date you’re choosing.
- Chinese data, like PMI’s and GDP, as well as inflation levels and monetary policy in China due to the heavy relations between the two economies.
- central banks interest rate decisions and press conferences. The RBA (Reserve Bank of Australia) is meeting on a monthly basis while the Federal Reserve in the United States is meeting every 6 weeks.
Important Economic Releases To Watch In Australia
AS mentioned above, Australian economy is highly dependent on what is happening with the Chinese economy and with commodity prices so if anything, one should know all the time what the Chinese economy is doing and how gold, platinum, palladium, copper, iron, etc are trading as they will have a strong influence on the AUDUSD pair.
Besides that, PMI’s (Purchasing Manager Index) releases are coming in three different parts, one for each sector: services, construction and manufacturing. Any release above the fifty level shows bullish conditions for the sector while a dip below fifty signals troubles as recession is showing its teeth.
Employment data and GDP (Gross Domestic Product) are also key economic releases but more important in the Australian dollar case are central bank’s interventions as recent examples show Governor making dovish statements when it comes to the Australian dollar and even giving targets for the appropriate value and markets are taking them as granted.
Important Economic Releases To Watch In United States
When it comes to United States, we must start with the fact that this is the biggest economy in the world and it goes without saying that a lot of important economic news are being released each and every month.
Because the central bank of the United States, the Federal Reserve, is having a dual mandate, it is obvious that jobs data (Non-Farm Payrolls) and inflation (CPI) are the ones that really matter. However, there are some other pieces of economic releases that influence markets, as follows: ISM (Institute for Supply Management) Manufacturing and Non-manufacturing (these are the equivalent of Europe’s PMI’s mentioned a bit earlier, Retail Sales (released on a monthly basis), GDP (release on a quarterly basis), PPI (Producer Price Index), ADP (private payrolls), Durable Goods Orders, etc.
What To Expect From Economic Releases
Expect market to travel the fastest when CPI (consumer price index – inflation) is being released as this is the one economic release that makes a central bank moving on interest rates. Also expect a lot of volatility to surround RBA (Reserve Bank of Australia) interest rate decisions and meetings as the central bank is meeting on a monthly basis to assess the economic situation in Australia.
RBA has a mandate related to the 3 percent inflation target band, as like any other major central bank in the world, the mandate calls for inflation to be kept between 2 and 3 percent. In other words, pay attention when inflation is being released as if it is coming far from the stated objective, the central bank will do all in its powers to make sure the mandate is fulfilled.
GDP of course that matters as it matters in any economy and besides, the Retail Sales also offer a glimpse in the consumer strength as consumer spending is the very engine of growth in any economy.
FOMC (Federal Open Market Committee) is meeting every six weeks and forward guidance and economic projections are being published as well as a press conference every 2-3 meetings. During these events, the US dollar is moving sharply and as a consequence all US dollar related currency pairs are moving as well, AUDUSD included.
More details and a complete list of tips and tricks are to be found by watching the two recordings that are coming with this educational project as we’re going to discuss the economic releases based on the economic calendar and divide them according to the importance. Understanding fundamental analysis is vital when it comes to successfully trading financial markets.