AUDCAD

Introducing AUDCAD

The AUDCAD currency pair is the combination of two currencies that are quite similar yet belong to totally different regions, the Australian Dollar and the Canadian Dollar. After the US dollar, the Australian dollar is the seventh most popular currency. It is Australia’s national currency. The Canadian Dollar is the world’s fourth most widely used currency. It is Canada’s official currency. Both of these countries are members of the G8, which explains why they are so popular. The G8 are the world’s top eight most developed or industrialized countries. They are highly regarded because of their overall economy. The AUDCAD currency pair is the forex industry’s ninth most popular minor currency pair. Despite its popularity, it is still considered a small currency pair because it lacks the USD, which is why it is sometimes known as a cross-currency pair. To understand how this currency pair interacts, we must first grasp who they are as individuals. Let’s become educated on AUD and CAD.

The Australian Dollar

The Australian Dollar, or AUD, is the official currency of the down under nation, Australia. It is the world’s seventh most traded currency. This refers to the quantity of trade that occurs with this currency pair in terms of the trading volume. This currency accounts for around 5.3 percent of all daily deals in the forex sector.

It is represented in the currency market by the symbol AUD. Australia is well-known for exporting precious commodities such as metals and energy. Gold is the most popular commodity it exports, while oil is the most popular energy resource it exports. Australia has only used British coinage as its legal currency since 1825. In 1910, they began utilizing actual notes 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 issuing AUD notes.

The Canadian Dollar

The Canadian dollar is the official currency of the maple nation, Canada. In terms of trading volume, the Canadian Dollar is the fourth most popular currency. Since 1841, Canada has used the Canadian Pound as its currency. This occurred during the reign of the British Empire. The United States, on the other hand, immediately became the most popular, and the USD swiftly overtook all other currencies. Canada then adopted the Canadian Dollar as its currency in 1858 in order to strengthen links with the United States.

The Bank of Canada is in charge of the manufacture of CAD notes. Canadians are well-known for their sense of irony and the freshness they add to the English language. They commonly refer to their paper notes using the same expression. The $1 note is widely known as a ‘Loonie,’ while the $2 note is known as a ‘Toonie.’

Why Trade AUDCAD

The AUDCAD pair has some pretty unique similarities despite belonging to opposite sides of the world. Due to these unique circumstances, they are a breath of fresh air in this industry. Here are the top reasons to trade this dynamic duo:

High Volatility

AUDCAD is fortunate to be able to have high volatile conditions despite being a minor currency pair. In fact, it is this factor that they’re a minor currency pair that is the reason for their volatility in the first place. The AUDCAD is considered a minor because it has a low trading volume. Forex pairs with low trading volumes usually experience much high volatility due to not having many traders involved at the same time. They have a low trading volume as traders usually prefer trading in the USD market with currency pairs containing the USD.

Market Predictability

The market conditions for AUDCAD are rather straightforward to predict. This is because they are most influenced by changes in their respective countries, Australia and Canada. Because the USD is the standard currency for global transactions, any significant changes anywhere in the world would have an impact on a pair including the USD. Similarly, any changes that happen anywhere in the European Union’s 28 member states would have an impact on a pair that contains the Euro. Due to this reason, it can become rather stressful to have to keep an eye on the economic conditions of the entire world. Currency pairs that are just tied to a certain location, such as AUDCAD, are much easier to forecast since we only need to keep an eye on their individual nations.

Commodity Correlations

Both Australia and Canada are two of the very few countries that share the same commodity correlations. Both these individual nations are popular for their exports of valuable metals and energy resources. Both Australia and Canada are some of the largest producers of crude oil and natural gas.

They are also the largest manufacturers of gold and iron. This is quite unique since it is very rare that we see two individual nations being known for the same reasons. This is also what makes the AUDCAD currency pair so unique. Due to these similar circumstances, the AUDCAD markets move pretty uniquely as compared to other markets.

AUDCAD Trading Tips

Due to the unique similarities we just discussed above, AUDCAD presents some unique trading conditions that require unique trading strategies as well. Following are the top trading tips for this minor currency pair:

Trade Timings

The forex markets are open 24 hours a day, 5 days a week. Despite this, it is a common misconception that you need to utilize all these hours in your trading. That can become quite stressful and it is rather inefficient. Instead, each currency pair has certain times in the day where they’re the most active due to their individual economies being awake and functioning. It is only during these times that it is best to trade these currency pairs. The AUD during the Sydney and Tokyo sessions. Similarly, the CAD is most active during the New York session. Therefore, the best time to trade the AUDCAD currency pair is between 7 pm and 4:30 am GMT.

Trend Trading

Trend trading is the process of spotting patterns on trading charts and utilizing them to place positions. Identifying an upward trend and a downward trend are two of the most important patterns that a trader needs to look for. These represent bullish and bearish market situations. An upward trend occurs when the highs rise higher and the lows rise higher as well. Similarly, a downward trend occurs when the lows get lower and the highs get lower as well. You can recognize trend patterns simply by glancing at a chart, thus this is a fairly basic trading approach that anyone can follow. Because AUDCAD is recognized for having regular upward and downward movements, this is an excellent approach for this currency pair.

Range Trading

The method of selecting when to enter a trade by analyzing support and resistance levels is known as range trading. The highest points on a particular chart are the resistance levels. Similarly, the lowest points on a particular chart represent support levels. Understanding the location of these highs and lows is critical to the range trading approach. For instance, if the price is approaching a resistance level and you believe it will hold, you may place a SELL order. This is also commonly referred to as going short. Similarly, if the price, on the other hand, reaches a level of support that you believe will hold, you may enter a BUY order. This is also commonly referred to as going long.  If the price goes below the support level, you can begin 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 enter the market long since the resistance level will be overruled.

Factors Affecting AUDCAD

Despite being very similar, they’re still impacted by a number of factors that make them just like any other currency pair in the forex industry. Here are the top factors impacting AUDCAD:

Gross Domestic Product

The Gross Domestic Product, or GDP, has a significant role in the fluctuations of this minor currency pair. GDP measures a country’s total economic performance. A positive GDP figure indicates that the economy is doing well. This, in turn, would encourage people to invest in the country’s economy, increasing the value of that country’s currency. If Australia experiences a favorable GDP, the AUD will rise in value, causing the AUDCAD to rise in value as well. In the case of CAD, the contrary is true. If Canada reported a positive GDP, the CAD would rise in value, causing the AUDCAD to fall in value.

Crude Oil Industry

Both Australia and Canada are among the largest producers of crude oil in the world. They’re highly known for their exportation of this valuable commodity. It is not often when we see a currency pair where each of the individual nations are known for the exact same reasons. Therefore, any changes to the demand for crude oil around the world will have a major impact on the economic conditions of both Australia and Canada. This can often cancel out each other if they’re supplied equally by both countries. I

f the demand for crude oil is high around the world, both Australia and Canada will be able to export them more often which would cause their economies to thrive. However, the AUDCAD pair would be left unstable due to being pulled at from either side. Similarly, if the demand for crude oil is low around the world, both Australia and Canada won’t be able to export them as often which would cause their individual economies to suffer a decline. However, the AUDCAD pair would be left unstable due to being pulled at from either side.

The Gold Industry

Both Australia and Canada are two of the world’s top producers of gold and other important metals. They are well-known for exporting this important product. It is not often that we find a currency pair when both countries are well-known for the same reasons. As a result, any changes in global demand for gold will have a significant influence on the economies of both Australia and Canada. If both countries supply comparable amounts, they may typically balance each other out. If there is a large demand for gold across the world, both Australia and Canada will be able to export it more frequently, causing their economies to prosper. The AUDCAD pair, on the other hand, would be left unstable as a result of being tugged from either side. Similarly, if global demand for gold is low, both Australia and Canada will be unable to export it as frequently, causing their respective economies to suffer. The AUDCAD pair, on the other hand, would be left unstable as a result of being tugged from either side.

Financial Institutions

Both the Reserve Bank of Australia and the Bank of Canada are majorly responsible for any instability in the AUDCAD marketplace. The RBA and BOC 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 RBA will have a positive impact on the AUDCAD currency pair. However, any positive results from the BOC will have an inverse impact on the AUDCAD. 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 AUDCAD market. From RBA, Philip Lowe who is the Governor of the institution is highly looked upon for his speeches. From BOC, Sharon Kozicki who is the Deputy Governor of the institution is highly looked upon for her speeches.

Unemployment Rate

Unemployment is also a key factor that influences the value of a forex pair. When a person is jobless, the government bears the task of providing basic essentials for their existence. As a result, the greater the number of jobless individuals, the greater the responsibility on the government to spend its reserves to care for the unemployed.

The greater Australia’s unemployment rate, the worse the country’s economy will be. This, in turn, would lead the value of the AUD to fall, causing the value of the AUDCAD to fall as well. Similarly, a low unemployment rate indicates that the economy is booming. This would lead the value of the AUD to rise, causing the value of the AUDCAD to rise as well.