AUD/USD currency pair is composed of the Australian dollar (AUD) and the American dollar (USD), and is considered a major currency pair. This financial instrument is characterized by high liquidity and considerable trading volume. The Australian economy is mainly resource-driven and largely depends on commodity prices. It is therefore called a commodity currency, while the AUD/USD pair is called a commodity pair.
The AUD/USD currency pair is influenced by factors that affect the value of the Australian dollar and the U.S. dollar. Sometimes those factors influence both currencies. As for the Australian dollar, it depends on the production volumes and prices of commodities, such as gold, iron ore, crude oil, and coal in Australia and around the world. Political factors include the business environment in China and Japan, which are the biggest customers for commodities produced in Australia. When in 2015 prices for iron ore, coal and oil, all of them major Australian commodities, slumped, the Australian dollar fell by 15% against the American currency.
Regulatory decisions, such as interest rate hikes and reductions. If the Fed intervenes in order to make the U.S. dollar weaker, the price of the AUD/USD currency pair could rise.
Gold has a positive correlation with AUD/USD and the pair tends to go up when gold rises. Investing in the Australian dollar may be a good solution for diversifying risks when trading on the Forex market. Since the Australian dollar serves as a base currency in the currency pair, hence the purchase of AUD/USD is equivalent to investing in the Australian dollar, whereas selling the pair corresponds to investing in the American dollar.
Risk warning: Trading in FX and CFDs entails high risk of losing capital.
