The Australian dollar (AUD) to United States dollar (USD) is one of the four “major” currency pairs and referred to as the “Aussie”. The USD is the most widely traded currency on global forex markets and the AUD is the fifth. In this pairing, AUD to USD, the Australian dollar is the base currency and the United States dollar is the quote. At the current price of 0.66 it takes $0.66 USD to buy 1 AUD.
In the latest AUD/USD news the Australian dollar has rebounded substantially to pre-coronavirus levels, gaining 15 per cent since its low in mid-March and reaching levels not seen since February. Australia was able to effectively manage the outbreak and did not suffer to the same degree as Europe, the UK or the US.
This has led to a quick rebound in consumer sentiment and spared the housing market, at least up until now. As with the rest of the world, the full economic impact is yet to be seen but it is safe to say that the effect should be less severe in Australia than most other developed countries.
The AUD has surged over 1.75 per cent in early week trading versus the USD as Australia continues to effectively control the coronavirus in comparison to other major economies. AUD/USD forex news is reporting that the pre-pandemic resistance level of 0.6629 has been breached and there is significant potential of a breakout in the near term.
The ability of Australia to combat the pandemic and recover more quickly has strengthened this potential. Traders should be watchful of global trade sentiment as the Australian domestic economy is relatively minor in comparison to its reliance on exports.
Australia has not engaged in as heated a war of words with China as the United States, but relations are still at a low for recent history. The recent political manoeuvring by China in regard to Hong Kong autonomy will strain relations with both countries.
Traders should follow political statements from both the US and Australia as the situation continues to escalate. News of further shutdowns in China, Europe or the US could affect the Australian economy and put upward pressure on the safe haven USD.
Many developed economies may need to implement a negative interest rate policy to combat deflationary pressure and hesitation on the part of central banks could also lead to a strengthening of the USD relative to the AUD.
AUD/USD analysis and sentiment
The latest AUD/USD news has focused on the post-pandemic recovery, the ability to restart commodity production and government stimulus announcements, as well as the state of the Chinese economy.
While Australia and the US are both major trading partners with China they are at different ends of the spectrum. Australia is a key supplier of raw materials to Chinese manufacturing with the US being the largest consumer of the final products.
The positive indications from the Chinese economy have impacted Australian dollar to US dollar news differently, as Australia ramps up commodity production and President Trump continues to escalate already tense relations. This has played well for the Australian dollar as it continues to strengthen even when some considered it to be overvalued.
The massive stimulus packages offered by the United States have not gone unnoticed. At the time of writing this has not changed the perception of the USD as the global reserve currency but conversations surrounding the ability of the US to continue issuing dollars have started.
The demand for dollars, especially in uncertain times has continued to strengthen the USD but the risk of inflation further down the road is increasing with each stimulus announcement. It is possible that in the mid to long-term there is a minor shift towards another major reserve currency, such as the Euro, for global transactions.
Why is AUD/USD so attractive to Forex traders?
AUD/USD is a highly liquid and relatively stable major currency pair allowing intraday traders to profit from AUD to USD trend movements. Historically, traders have also been drawn to the significantly different central bank interest rates in the two countries as Australia tends to set higher than average spot rates.
This is less of a factor currently as both countries have slashed rates in an effort to support the economy but it is likely that Australia will be in a position to gradually increase interest before the US is able to do so. The geographic distance of the two countries allows for the release of key economic data at different times during the day and the continual price movements.
Trade Australian Dollar / US Dollar CFD
AUD/USD: Buy or Sell?
Given current AUD vs USD news the currency pair is considered a buy. The USD is strong and should remain stable in the short term while the AUD has potential to break through the resistance levels. As the world starts to reopen after the coronavirus pandemic there should be a slow shift towards taking on additional risk which will benefit the AUD as investors trade their dollars for other currencies.
Given the intensifying back and forth between President Trump and Xi Jinping it is likely that Australia will soften its stance prior to the US doing so. This will further strengthen the upward pressure on the AUD relative to the USD. Any significant setbacks in the global economic recovery will result in strengthening of demand for safe haven currencies such as the USD and traders should monitor announcements carefully.
Follow the latest forex news and trade the AUD/USD currency pair with Capital.com. Make you own bets on the AUD to USD price forecast and trade it with CFDs.