When looking at the currency exchange market, there is a lot of information to consider. Whether it’s technical analysis or political announcements, there are a number of different factors to keep an eye out for. The Australian dollar is one such currency, and it’s important to understand the factors that affect the price of this currency.

Commodity currency

Australia’s economy is heavily based on natural resources and commodities. The country is a major exporter of coal, iron ore, and minerals. It is also the third largest producer of gold in the world.

The Aussie Dollar has traditionally been reliant on trade of raw materials. China is a key trading partner for Australia. As such, news involving the Chinese economy can be extremely influential.

The Australian dollar is also closely linked to the Chinese yuan. This pair is one of the most traded pairs in the forex market, accounting for close to ten percent of its overall volume.

The currency is also influenced by the interest rate differential between the Federal Reserve and the Reserve Bank of Australia. This is known as the RBA/Fed rate differential.

Trade relations between Australia and the United States

Trade relations between Australia and the United States are an important part of their relationship. Both countries share common interests, cultural affinities, and people-to-people connections. These factors contribute to a healthy, robust bilateral relationship.

The two nations have a long history of defending each other’s interests and have been involved in every major war in the last century. Their alliance is the anchor for stability in the Indo-Pacific region and around the world. They also engage in a trilateral security dialogue and are engaged in counterterrorism and counterproliferation activities.

Australia is a large investor in the United States. Its FDI in the United States totalled $98.0 billion in 2020. Among the key sectors, finance and insurance companies led the way. Other direct investments include manufacturing and professional, scientific, and technical services.

Political announcements

AUD/USD is one of the most traded currency pairs in the world. This has been attributed to a number of factors including the ongoing growth of the Australian economy, and the fact that Australia is a global trading partner. As such, there are numerous economic data releases that can have an impact on the pair.

The AUD/USD has enjoyed a favourable upswing over the last couple of years. It has been driven in part by a rise in the prices of gold. These are generally considered a safe haven against inflation. Aside from this, the Australian economy has exhibited steady growth over the past year.

In the first half of September, US equity prices fell in conjunction with risk sentiment across the globe. However, these factors are less likely to influence the medium-term outlook than are the more temporal variables.

Technical analysis

The AUD/USD pair is in a bearish channel, as shown on the chart above. This is a major pattern that has been building since early 2018. It could be a reversal point, but a long consolidation may be in store.

Technical analysis shows that the AUD/USD pair is still trading above its 0.6800 handle against the US dollar. This indicates that a bullish trend is likely to resume. If this is the case, traders will be looking for an opportunity to buy the pair.

A major trendline resistance is currently converging in the 0.6920 area. Traders will need to sustain a breakout above this level to spark a major rally.

Another key factor that influences currency exchange is interest rate disparity. The US Fed is the lender of last resort in times of crisis, and it has the power to set reserve requirements.