Forex Marketing in Australia

Australia is one of the most multicultural countries in the world, and home to the world's oldest continuing culture. It is Officially known as the Commonwealth of Australia, Australia could be found somewhere in the Southern Hemisphere, just southeast of Asia. Considered the worlds biggest island, Australia is the only country on earth that governs an entire continent!

Before the coming of settlers from Europe in 1788, Aboriginal people inhabited most of the country.

Since then, people from all over the world have migrated to Australia, which has made it one of the most culturally diverse countries in the world.

Currently, Australia is home to people from 200 different countries. And Lastly, likely the most importantly, Australia is known for producing the meanest and most hardcore actors of all time like Mel Gibson, the Braveheart; Hugh Jackman, the Wolverine; and the legendary Heath Ledger, the Joker!

Additionally, they have much-kangaroos, some battle tank armadillos, and bomber pelicans. You can see how the rest of the world really had no choice but to name an entire continent after them.

Australia: Facts, Figures, and Features

• Neighbors: New Zealand, Papua New Guinea, Indonesia

• Size: 2,969,907 square miles

• Density: 7.3 people per square mile

• Capital City: Canberra (population 358,222)

• Head of State: Queen Elizabeth II

• Head of Government: Prime Minister Scott Morrison

• Currency: Australian dollar (AUD)

• Main Imports: Machinery and transportation, other electrical and telecommunications equipment; with crude oil and petroleum products

• Main Exports: Ores and metals; wool, food and live animals; fuels, transport machinery and equipment, Hugh Jackman, Nicole Kidman, Heath Ledger

• Import Partners: China 18.4%, U.S. 11.7%, Japan 7.9%, Singapore 6%, Germany 4.6%, Thailand 4.2%, South Korea 4.1%

• Export Partners: China 29.5%, Japan 19.3%, South Korea 8%, India 4.9%

• Time Zone: GMT +10

• Website: https://www.australia.gov.au/

Economic Overview

Australia is a highly developed country with a high-income economy; it has the world's twelfth-largest economy, tenth-highest per capita income and eighth-highest Human Development Index. Australia is a regional power, and has the world's thirteenth-highest military expenditure. When Compared to G7 country, Australias overall economy is relatively small. According to the World Bank, but however, on a per-person basis, its GDP is even higher than the U.K., Germany, and even the U.S.!

While fifteen years back or so, Australia‘s economy has grown an average of 3.6% yearly, well above the 2.5% world norm. No wonder it ranked third overall in the Legatum Institute’s 2011 Prosperity Index!. Australias economy is highly service-oriented, with over 70% of its GDP coming from industries like finance, education, and tourism.

Despite having a very robust export industry and stellar growth, Australia has been notoriously famous for always having a high present account deficit.

This means that Australia is using up more resources from other economies to convince its own domestic consumption.

Monetary & Fiscal Policy

Fiscal policy represents government spending policies that influence macroeconomic conditions. Through fiscal policy, regulators attempt to improve unemployment rates, control inflation, stabilize business cycles and influence interest rates in an effort to control the economy.

Headed by Philip Lowe, The Reserve Bank of Australia (RBA) is the main governing body of Australia when it comes to financial and fiscal policy. The RBAs aim is three-fold:

• Keep the exchange rates stable

• Ensure growth

• Maintain full employment

To do this orderly, the bank believes that the countrys annual inflation rate must be kept within 2-3%. By keeping a tight rein on inflation, the value of their domestic currency is safe, which will eventually lead to sustainable economic growth. How does the RBA make sure inflation is controlled？ Two ways: modifying the cash rate and conducting open market operations.

The official cash rate is the term used in Australia and New Zealand for the bank rate and is the rate of interest which the homogeneous central bank charges on overnight loans between commercial banks. Open market operations, on the other hand, is the way the RBA controls the money supply through the buying and selling of government loans or other financial property With the exception of January, the RBA meets monthly to discuss what changes it will make to monetary law.

For easier understanding, take this simple example. Lets say that inflation in Australia is increasing much faster than what the bank wants. Therefore to suppress the high inflation rate, the bank decides to raise the cash rate, that will effectively increase the cost of borrowing by…. uh, borrowers. But generally, this move will tone down lending, and lessening the overall money in circulation. Already the basic supply and demand tell us that the scarcer something is, the more valuable it is!

Getting to Know the AUD

The Australian Dollar is the currency of Australia. Their currency rankings show that the most popular Australian Dollar exchange rate is the AUD to USD rate. The currency code for Dollars is AUD, and the currency symbol is $. Even though theyve got their seasons mixed up, the Australians are always up bright and early to play. Well, this is mostly because the Australian market is the first to open every week!

Just like the people inhabiting the place, Australias local currency, the AUD, is called the Aussie.

I'm called a commodity dollar for a reason

The central bank in Australia is called the Reserve Bank of Australia. As the 5th most traded currency in the world, the Australian dollar is also mention to as buck, dough, or the Aussie. The Australian Dollar is known as a commodity currency due to its substantial raw material exports. As a result, the AUD is affected by China and other Asian import markets.

But One important behavior of the AUD is that it has a high positive correlation with gold prices. The reason behind this is that Australia is the third biggest gold-digger, gold producer in the world. As a result, whenever the price of gold rises or falls, the AUD goes along for the ride.

and I;m one of the best candidates for carry trade.

The most popular carry trades involve buying currency pairs like the Australian dollar/Japanese yen and New Zealand dollar/Japanese yen because the interest . Among the major currencies, the AUD has been known for having a high interest rate. This makes it a favorite for carry trades.

Carry trade is the practice of buying a currency with a high interest rate in exchange for a currency with a lower interest rate.

Im only awake a couple of hours a day…

Most of the AUDs movement happens during the Asian trading session, the time when economic data from Australia is released.

but bad weather is one of my worst enemies!

Climate model projections too suggest (though with considerable unreliability) that in the next several decades, heavy rainfall events in Australia will tend to. Given the commodity-based economy of Australia, hostile weather conditions tend to put a serious strain on Australias growth, which leads to a sell-off in the AUD.

But How roughly do weather conditions affect AUD？

Well, lets just say that during the Australian drought of 2002, AUD/USD fell to .4770 – that is almost half its current exchange rate!

Important Economic Indicators for Australia

• Consumer Price Index – Because the RBAs primary goal is controlling inflation, the CPI, which measures the overall change in the price of consumer goods and services, is closely watched by the bank.

• Balance of Trade – Australia has an highly robust trade sector so currency traders and bank officials alike tend to watch changes in the countrys export and import levels.

• Gross Domestic Product – This measures how great Australias economy is doing. Positive readings specify economic growth while negative readings mean economic contraction.

• Unemployment Rate – The unemployment percentage records shows how many people in Australias labor force are out of work. The number of people employed, or rather, unemployed in this cause, has a high correlation with economic project. A person without a job means he has less money available for spending.

What Moves the AUD

Economic and Interest Rate Outlook

What affects AUD to the great extent are macroeconomic factors such as financial policy rhetoric, interest rates, and domestic economic data.

When trading AUD, always focus to the interest viewpoint. Comments made by officials from the RBA about interest rates, for example, could create a strong impact on the AUD.

Chinas Economy

Chinas economy is the second-largest in the world, behind only the United States. But after three decades of spectacular growth, China is now moving into a slower growth phase – an inevitable result of its transition from a developing economy to a more mature, developed economy. In the 1980s, 1990s and early 2000s. In order to create end goods, China sources a lot of its raw materials like coal and iron ore, from Australia.

China must first needs to exchange its local currency for the AUD

For it to buy raw materials from Australia. This means that increased demand for Chinese goods tends to prop up the AUD‘s value. In addition, a decline in demand for Chinese products could lead to a fall in the AUD’s value.

New Zealand Data

To a lesser extent, data from New Zealand effects the AUD‘s price action. Take note that New Zealand’s economy is very similar to Australia, which makes their currency positively correlated.

In short, the relationship of the two countries is sometimes described as “Trans-Tasman” to show how closely tied their economies are and to indicate the existence of the Tasman Sea sitting right between them. Having said that, it is important to be aware of important upcoming data from New Zealand as it could indirectly cause the AUD to move.

Trading AUD/USD

AUD/USD is liked by forex traders for its liquidity, relatively attractive spreads and link to global economic trends.

AUD/USD often reacts swiftly to economic data and central bank policies, providing numerous trading opportunities. Therefore it is traded in amounts denominated in AUD. Standard lot sizes are 100,000 AUD and mini lot sizes are 10,000 AUD.

The pip value, which is denominated in U.S. dollars, is calculated by dividing 1 pip of AUD/USD (that‘s 0.0001) by the AUD/USD’s current rate.

Profit and loss are denominated in U.S. dollars.

For one standard lot position size, each pip movement is worth 10 USD.

For one mini lot position size, each pip movement is worth 1 USD.

Calculations of margin are based on U.S. dollars. For example, if the current AUD/USD rate is 0.9000 and the leverage is 100:1, 900 USD is needed in available margin to be able to trade on a standard lot of 100,000 AUD. Even though, as AUD/USD rises, a larger available margin in USD is required. Conversely, the lower AUD/USD rate is, the less required available margin is needed.

AUD/USD Trading Tactics

As the AUD is considered one of the best candidates for carry trade, which is the buying of a currency with high interest rates and the selling of a currency with low interest rates, AUD/USD is highly affected by crosses.

How can you use this to your advantage？

Well, if you see a break of a significant technical support level in AUD/JPY, that could be a good sign to sell AUD/USD!

Additional thing to take note when trading AUDUSD is data coming out from New Zealand. Because of Australia‘s nearness and trade relations with New Zealand, positive economic data from New Zealand usually helps push the AUD’s value up.

This means that better-than-expected New Zealand economic reports could be seen as a good signal to buy the AUD. Conversely, poor economic data from New Zealand could be a reason to sell the AUD.

Finally, take some time to look at how commodity prices, especially gold are doing. Frequently, the price of gold leads the AUD. This means that whenever the gold rises in value, AUD/USD could rally soon after! Of course, when the value of gold falls, the AUD also tends to follow suit.