The AUD/USD pair is a pairing of two major currencies. While the AUD is the world’s 6th most traded currency, the USD is hands down the most traded and widely-used currency in the world. The AUD/USD is considered a commodity pair, on account of the commodity-focused nature of both economies involved.
The AUD
The Australian Dollar is among the most popular currencies among traders, and the reasons behind its popularity are numerous. First of all, as said above, it is a commodity currency, strongly correlated with the price of gold. The Australian economy is based on the exporting of commodities such as gold, oil, LNG and various minerals and base metals.
Secondly, the currency of a stable, industrialized nation, through its exposure to the Asian markets, the AUD offers wonderful diversification opportunities for traders.
The AUD has been floating since 1983 and the Australian government has largely refrained from directly influencing its value.
The USD
The US Dollar is hands-down the most traded currency in the world. Used by the US (and an impressive number of other countries) as national currency, most of the USD reserves are apparently held outside the US.
The Fed is the authority keeping a close eye on the evolution of the USD’s value, which it can influence to a certain degree through the manipulation of the lending interest rates.
Upon its introduction, the USD was pegged to a basket of some 23 currencies. It became floating in the 70s though, effectively starting this trend.
AUD/USD Analysis
As said above, the AUD/USD pair is a commodity pair, which essentially means that with the fluctuation of the commodity cycles, traders versed in this vertical will be presented with great trading opportunities by this currency pair.
The AUD/USD is also closely correlated with the USD/JPY pair. The AUD/USD is usually not a good fit for carry trading.