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Sat, Apr 20, 2024


Introducing GBPAUD

GBPAUD is the fourth most popular minor currency pair in the forex industry. It comprises of the British Pound and the Australian Dollar. The reason it’s considered a minor pair is because it has a low trading volume. What this means is that not many people are trading this currency pair. The reason this is so is that it does not include the United States Dollar. The USD is the most popular currency in the world. Most traders only trade currency pairs which include the USD. A currency pair that does not contain the USD is considered a cross-currency pair. GBPAUD is also a cross-currency pair. The trading of cross-currency pairs is known as cross trading. Now because GBPAUD is not a popular pair to trade, it is significantly less liquid as compared to other forex pairs. This makes it prone to becoming extremely volatile during any minor changes in the individual economies of the two countries. Depending on your trading strategy, this may prove to be either beneficial or quite stressful to trade. Let’s take a look at these currencies as individuals in order to better understand how they work together.

The British Pound Sterling

The Pound is the official currency of the United Kingdom, British Overseas Territories, and UK Crown Dependencies. At least eight countries and territories throughout the world have undoubtedly tied their currencies to the pound sterling. The pound sterling, sometimes known as the ‘Quid,’ is the world’s oldest currency. It remains one of the most important currencies to this day. The pound was adopted as the equivalent of one pound of silver as early as 775AD. The first Pound coin was issued in 1489, and following England’s loss against France in 1694, Pound notes issued by the newly founded Bank of England began to circulate.

GBPUSD surged as 1

The pound’s worth began to be related to gold weight rather than silver weight in the early 18th century. However, the government suspended the gold standard in order to finance its war efforts during World War I. Following the war, it briefly reverted to the gold standard, but the beginning of World War II caused the country’s currency to be fixed. The currency fix was broken in the 1970s, and the pound sterling is currently a freely floating currency.

The Australian Dollar

The Australian Dollar is the official currency of Australia. It is the fifth most traded currency in the world. This is in terms of trading volume or the amount of trade that occurs with this currency pair. In the currency market, it is denoted by the symbol AUD. Since 1825, Australia has only used British coins as its official currency. They began using physical notes of the Australian Pound in 1910. However, in 1966, it changed its currency to the Australian Dollar in order to enhance relations with the United States.

AUDUSD performed lower

The Reserve Bank of Australia is in charge of issuing AUD notes. The Australian Dollar is among the most popular currencies when analyzed on its own as Australia has a place in the G8 as well. This is a list of the top 8 most developed countries in the world. Their economies are of great value and are always looked highly upon.

Why Trade GBPAUD

Traders, especially those new to this industry, are usually quite skeptical of trading minor pairs like GBPAUD. They tend to get pulled more towards pairs that include the USD. This is probably because the USD is the most popular currency and it often feels like trading within your comfort zones. However, there’s a whole world outside of the USD. GBP and AUD are individually among the most popular currencies but together, they’re just as strong. Here is why you might want to try trading GBPAUD:

Market Volatility

GBPAUD is a minor currency pair. This is because they have a low trading volume. Traders don’t trade this forex pair as much as other forex pairs. Due to this reason, their market isn’t that liquid. Low liquidity can often make the market extremely volatile all of a sudden. Although GBPAUD is usually found in pretty calm conditions, if anything were to happen in their individual regions, they can become among the most volatile currency pairs in the industry.

Market Predictability

It is considerably easy to predict the market conditions for GBPAUD. This is because they’re only mainly impacted by any changes in their own regions which is the UK and Australia. A pair including the USD would be impacted by any changes occurring anywhere around the world because USD is used as the standard currency for exchanges everywhere. Similarly, a pair including the Euro would be impacted by any changes occurring anywhere in the 28 states that make up the European Union. Therefore, it becomes quite stressful to keep track of every region that may impact a currency pair. Forex pairs that are only tied to single regions like GBPAUD are much easier to predict considering that we would only need to analyze their own economies.

Interest Yields

The UK is well-known for its high-interest rates, which are given by the Bank of England. These high-interest rates are considerably higher than those of market giants such as the United States and Japan. When compared to the UK, Australia has much lower interest rates.

Bank of England policy meeting

Traders are drawn to the GBPAUD 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.

Cross-Currency Pair

One of the most compelling reasons to trade the GBPAUD is that it is a cross-currency pair. 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 GBPAUD is an excellent example of such a currency.

GBPAUD Trading Tips

It is a common misconception that the same trading strategy can work for each currency pair. You see, each currency pair is impacted by different conditions, and therefore, they move in a different way from each other. It is important to understand the movement of each currency pair in order to figure out which trading strategy will work the best for them. Here are the top trading tips for GBPAUD that will better help you place profitable positions:

Carry Trading

The process of borrowing a low-interest-rate currency in order to invest in a higher-interest-rate currency is known as carry trading.  Carry trading is a popular trading strategy for the GBPAUD currency pair. This is because the GBP has a far higher interest rate than the AUD. This currency pair offers a substantial interest yield as a result of these interest rate differences. The currency traded in the transaction is referred to as the funded currency. This currency is frequently associated with a lower interest rate. The GBP has historically been a popular funded currency. Going short, or selling GBP while gaining the AUD, is essential for successful GBPAUD carry trading.

Range Trading

Range trading is when you use support and resistance levels to determine when to enter a trade. The highest points in a particular chart are the resistance levels. Similarly, the support levels in a particular chart are the lowest points. Understanding the location of these highs and lows is critical to the range trading approach. For example, if the price is reaching a resistance level and you feel it will hold, you might enter into a SELL transaction (go short). If, on the other hand, the price is approaching a support level that you feel will hold, you may perform a BUY transaction (go long). If the price continues to fall below support, you can enter a short position because the support level will no longer be valid. Similarly, if the price continues to rise over the resistance level, you may go long because the resistance level will no longer be valid.

Day Trading

Day trading is a trading approach in which you open and close a trade on the same day. All deals must be concluded before the market closes, whether they end in a profit or a loss. Scalping is a popular type of day trading method. Traders would open a BUY and SELL position at the same rate for the same currency pair. This allows them to benefit regardless of which way the market swings. When the market falls, they profit from the alternative position that they opened. This method is ideal for GBPAUD since this dynamic pair may be quite turbulent at times. Scalping is an excellent approach for capturing earnings between shifting market rates during times of instability.

Factors Affecting GBPAUD

As discussed above, every currency has its own factors which influence its movement. This could be something as little as a weather disturbance or something as big as a change in government. What may make one currency become completely unstable may not even make another currency move at all. It is therefore important to understand what factors influence a certain forex pair in order to know how it might react in any given scenario. Following are some of the factors which influence GBPAUD:

Financial Institutions

Both the Bank of England and the Reserve Bank of Australia are majorly responsible for any instability in the GBPAUD marketplace. The BOE 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 BOE will have a positive impact on the GBPAUD currency pair.

Reserve Bank of Australia

However, any positive results from the RBA will have an inverse impact on the GBPAUD 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 GBPAUD market. From BOE, Andrew Bailey who is the Governor 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.

The Gold Industry

Australia is the world’s third-largest gold exporter. As a result, its economy is heavily reliant on the export of this expensive product in order to flourish and grow in value. Any changes in the commodities market, such as demand or pricing, will have an immediate influence on the GBPAUD pair.

Gold prices are set to bull

If the demand for gold rises, Australia will export more gold, causing the GBPAUD to fall in value. If the demand for gold falls, Australia would suffer since it will be unable to export as much of it, causing the GBPAUD to rise in value. This may be observed during the wedding season in Asian nations, as the demand for gold skyrockets. This season leads the GBPAUD to plummet.

The Transport Industry

The UK is among one of the largest exporters of automobiles and their parts. As a result, their economy is heavily reliant on the demand for these products around the world. Any changes to the demand for transport vehicles will have a direct impact on the value of the GBP/If the demand for automobiles drops, the UK won’t be exporting them as much, and therefore, the value of GBPAUD will drop. Similarly, if the demand for automobiles increases around the world, the UK will be exporting them more often, and therefore, GBPAUD will increase in value.

Most common questions asked by the forex traders about GBPAUD:

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GBPAUD Trading Signals

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