EURAUD is among one the minor currency pairs in the forex industry. It is the fifth most popular currency pair in terms of the trading volume. EURAUD can also be referred to as a cross-country pair. This is a pair that does not include the USD. Usually, when exchanging currencies, you first exchange them into USD before exchanging USD into the final currency. This method can prove to be quite the hassle plus it is more expensive to do three transactions instead of two. A cross-country pair does not require the USD and is therefore much cheaper and more efficient. Both EUR and CAD are individually among the most popular currencies. This is also due to the fact that they belong to the states in the G8. The G8 are the eight most industrialized or most developed states in the world. These states include the EU and Australia. The reason why this pair is still considered a minor is that it is fairly new due to the Euro only being developed recently. It is also a minor due to having a low trading volume. EURAUD trades comprise of only 1% of the trading volume in the forex industry. Due to this low trading volume, it ranks 28th on the list of most-traded forex pairs. EURAUD averages a daily trading volume of $18 billion. This seems like a lot but it is almost negligible compared to the major pairs.
The Euro is a fairly recent currency, having been introduced in 1999. It is the second most widely used currency after the US dollar. The goal of creating this currency was to provide the EU’s member nations with a single currency to facilitate trade between them. Initially, EUR was simply a digital currency.
It wasn’t until later that physical notes for this valuable currency were printed. In the more than two decades that this currency has been on the market, it has been embraced by 19 of the EU’s 27 member states. Aside from these EU member states, five more countries have chosen the Euro as their national currency. Because the Euro is a currency of numerous states rather than a single one, it has a far greater potential to be influenced as a result of multiple governments becoming involved. Any unusual conduct in any of the states might have a direct influence on this valued currency.
The Australian Dollar
The Australian Dollar is the national currency of Australia. It is represented by AUD in the forex markets. Australia originally had been using the British coins as its currency since 1825. In 1910, they adopted the use of the Australian Pound. However, in order to improve relations with the United States, it changed its currency to the Australian Dollar in 1966.
The Reserve Bank of Australia is responsible for the issuance of AUD notes. On its own, the Australian Dollar is the fifth most popular currency in terms of the trading volume. It is also relatively stable as an individual currency as compared to the Euro as it isn’t impacted by several states, just the commonwealth of Australia.
Why Trade EURAUD
Now you may be wondering, why should I trade EURAUD if it isn’t even a major forex pair? If it has such a low trading volume, should I really enter this market? The answer is yes, of course! Just because a currency has a low trading volume does not mean it shouldn’t be traded. In fact, having a low trading volume can come to your advantage as well. Let’s dive into more detail on why trading this dynamic duo can prove to be quite beneficial for you:
One of the biggest advantages of trading with the EURAUD currency pair is that it is relatively much easier to predict the direction their markets are going to move. This is mainly because they’re mainly only impacted by any instability in their own economies. This is unlike the USD which is impacted by instability in any economy due to being the most traded currency pair in the world. It is important to note that although these pairs usually have pretty stable market conditions, they can become extremely volatile if anything minor shifts in their economy. However, since we know that this is what causes them to become unstable, it becomes fairly easier to predict the direction of the markets and therefore place more appropriate trades.
One of the most compelling reasons to trade the EURAUD pair is that it is a cross-currency. As a result, they can greatly diversify your asset portfolio. Trading a currency pair that includes the USD presents a number of difficulties. The most often used currency in the business is the US dollar. As a result, it is also the most affected in the event of an inconvenience. Any big economic event occurring anywhere in the world has a direct influence on the USD’s value. As a result, the majority of the time, any dollar currency pair will face volatile market circumstances. Some traders prefer trading currencies that do not include the USD in order to prevent any abrupt volatility in market values. The EURAUD is an excellent example of such a currency. Both the EUR and the AUD are among the most popular currencies in the world. They are unstoppable when coupled together, despite the fact that they are still considered minors.
The European Union is well-known for its high-interest rates, which are given by the European Central Bank. These high-interest rates are considerably higher than those of market giants such as the United States, the United Kingdom, and Japan.
When compared to the EU, Australia has much lower interest rates. Traders are drawn to the EURAUD currency pair due to its high-interest yields as a result of these interest rates. This pair provides significant yields due to the large difference in interest rates between them. Because of the large payouts, traders frequently utilize a carry trade when trading this currency pair. Carry trade is the practice of selling a currency with a low-interest rate in order to purchase one with a higher interest rate.
EURAUD Trading Tips
Over the years, the forex industry has quickly become the largest financial industry in the world. There are billions of dollars’ worth of trades taking place in this industry on a daily basis. Now with a lot of money comes a lot of people as well. The forex industry has attracted countless people. Everyone comes equipped with their own trading strategies. Everyone claims that their strategy is the superior one and that it’s the only way to make a ton of money safely. It is important to note that almost every strategy can work and make you a ton of money as long as you’re implementing it the right way. Therefore, you need to choose a trading strategy that will work best with your routine in order to earn the best profits while also maintaining sanity. The following are some of our top trading tips with the EURAUD currency pair:
The forex market is open almost the entire day. People trade till markets close for a few hours before they start resuming it. It is also close on weekends. Although the markets are open pretty much as day, it doesn’t necessarily mean that you should trade them any time of the day. Certain currencies only do best during their optimum trade timings. According to analysts, EURAUD performs the best in between the London and Sydney sessions. This is between 1pm to 5pm GMT. This is because these cities belong to both the EU and Australia. If both these individual countries were to release economic or monetary statements that would impact the forex industry, they would do so within this time slot. This is the biggest reason why the EURAUD currency pair has a really predictable market as well.
Carry trade is the practice of borrowing a low-interest-rate currency to invest in a higher-interest-rate currency. This allows you to lock in a higher rate of return on your investment. One of the most common trading methods for the EURAUD currency pair is carry trading. This is due to the EUR having a far higher interest rate than the AUD. Because of these interest rate discrepancies, this currency pair has a significant interest yield. It is crucial to note that, while this technique is ideal for this dynamic combination, it is still a high-risk strategy that should be traded with great caution. The currency that is exchanged in the transaction is known as the funded currency. This currency often has a lower interest rate. Historically, the EUR has been a popular funded currency. Going short, or selling the euro while simultaneously acquiring the Australian dollar, is critical for successful EUR/AUD carry trading. When this happens, you will be paid interest based on the difference in interest rates between EUR and AUD as well as the amount of your investment.
It is important to take advantage of any tools available to you in order to better help you make decisions regarding any positions you may be thinking of opening. The best method of doing so is watching out for trend lines. This is the biggest secret professionals use in order to make optimum profits with minimal risks involved. Support and resistance levels are the best types of trend lines that you need to look out for. They are fairly simple to understand and can still make you a ton of money. You may also add indicators to your chart. This tool analyzes the market and finds the best deals for you according to the market conditions. However, it is important to note that while all tools may claim to make you a ton of profit, you still won’t be able to do so unless you put your own heart and soul into it.
Factors Affecting EURAUD
Don’t let this minor currency pair fool you. It may belong to one of the more stable currencies, but it is still impacted by a couple of factors that can cause it to become unstable. The factors impacting EURAUD include:
Both the European Central Bank and the Reserve Bank of Australia are majorly responsible for any instability in the EURAUD marketplace. The ECB and RBA release monthly reports and statements regarding updates to any policy changes. These reports also display the economic and monetary forecasts for the upcoming short-term. Any positive results from the ECB will have a positive impact on the EURAUD currency pair. However, any positive results from the RBA will have an inverse impact on the EURAUD currency pair. The representatives of these individual banks also hold speeches frequently where they explain these results in more detail. These speeches are just, if not more, important in determining the direction of the EURAUD market. From ECB, Christine Lagarde who is the President of the institution is highly looked upon for her speeches. From RBA, Philip Lowe who is the Governor of the institution is highly looked upon for her speeches.
Interest Rate Decisions
Interest rate decisions are a major contributing factor towards the movement of EURAUD in the forex markets. Any rise in interest rates for the EUR will have a directly proportional impact on the EURAUD currency pair. Similarly, any rise in interest rates for the AUD will have an inversely proportional impact on EURAUD.A great example can be seen when the ECB decided on increasing its short-term interest rates. This had caused the EURAUD pair to increase in value. If the Reserve Bank of Australia decided on increasing their interest rates any more than what it already is, the EURAUD pair would decrease in value.
The Gold Market
Australia is the third-largest exporter of gold in the world. Therefore their economy greatly depends on the export of this valuable commodity in order to thrive and increase in value. Any changes to the market for this commodity such as demand or prices will have a direct impact on the EURAUD pair.
If the demand for gold increases, Australia will export more gold and therefore, EURAUD will decrease in value. If the demand for gold decreases, Australia will suffer as they wouldn’t be able to export them as much, and therefore, EURAUD will increase in value. This can be seen during the wedding season in Asian countries where the demand for gold increases quite significantly. This season causes the value of EURAUD to drop like a fly.
Most common questions asked by the forex traders about EURAUD:
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