THE EURO/AUSTRALIAN DOLLAR
Trade the EUR/AUD on the eToro platform. Below you can find all the information you need about this interesting currency pair, which has been a trader favorite for many years. Learn more about the history of these currencies and if trading them is right for you.
WHO SHOULD CONSIDER TRADING THE EURO/AUSTRALIAN DOLLAR?
Opportunists: Investors who feel strongly about the prospects of the EU or the Australian economy. Buying or selling a country’s currency is perhaps the most direct method of showing confidence, or a lack thereof.
Hedge seekers: Placing a side bet on the EURAUD currency pair can be done for hedging purposes – a type of backup side trade when the majority of a portfolio’s remaining resources are placed elsewhere.
Day traders: Anyone looking to capitalise on short-term movements. Catching a short-term trend of only a few pips can equal a large return on investment.
WHY TALK ABOUT THE EUR AUD?
Considered a major currency pair, both the euro zone and the Australian economy encompass a large portion of global GDP. Since the founding of the euro currency in 1999, the Euro/Australian Dollar provided plenty of opportunity for traders, due to its rapid movement. Both currencies do not share a fixed rate mechanism, meaning both can rise and fall against the other freely.
WHAT DO I NEED TO KNOW ABOUT THE EURO AND THE AUSTRALIAN DOLLAR?
The Australian Dollar became the national currency of Australia back in 1966. It replaced the now defunct Australian Pound. By contrast, the Euro is far younger, only becoming the official currency of the Eurozone in 1999.
The total GDP of the European Union is just shy of 20 trillion USD, the largest such customs union in the world. The Eurozone countries inside the European Union have a shared monetary policy that is dictated by the ECB, or European Central Bank.
Australia has been a sizzling economy over the last decade, making it one of the richest countries with the highest standard of living in the world. Unlike the Euro, the Australian Dollar’s domestic influence comes primarily from Australian authorities.
HOW HAVE THE TWO CURRENCIES TRADED AGAINST EACH OTHER SINCE 1999?
Over the last year, the Australian Dollar has slowly been losing ground to the Euro. One reason for this trend could be the recovery of the EU over the last several months from a serious multi-year recession.
When the pair was first formed in 1999, it hovered around 1.88. Until 2009, movement was restricted between 1.9 and 1.6. But after the global financial crisis, the value of the Euro plummeted, reaching a low of 1.2 in 2013. Since then, the Euro has enjoyed some recovery, climbing back to 1.6.
WHAT ARE THE FACTORS THAT MOVE THE EUR/AUS VALUE?
Arguably, the key factor that will determine the direction of this currency pair is the European Central Bank. Its monetary policy has far-reaching implications, including the value of the Australian Dollar. Australian financial reports will also have some impact, including the Royal Bank of Australia’s interest rate decisions and the monthly employment report. Australia and Europe are closely linked, with 15% of Australia’s total goods trade going to the customs union.
WHAT ARE THE POSITIVE REASONS FOR TRADING THE EUR/AUD?
The market is extremely liquid. This means there will never be a shortage of buyers and sellers available, and that flexibility at a moment’s notice is almost always guaranteed.
Both economies are stable from a financial and political perspective. This puts traders’ minds at ease, knowing that a catastrophic force majeure type of event is highly unlikely.
Information is readily available to everyone regarding both currencies and markets. This is especially appealing to beginners, who may not be aware of how to find pertinent information related to this currency pair.
WHAT YOU MAY WISH TO CONSIDER
When it come to the EU and the Eurozone, there is never a dull moment. Social upheaval and political turmoil are a monthly occurrence at best. This should not deter traders however, as it could indicate there are more opportunities ahead in the future.
The Australian Dollar is one of the more stable currencies in the world due to conservative fiscal policy by the Australian government in the past. But times are changing. The Australian debt total has reached 6.1 trillion dollars recently. It will be interesting to see what happen to the Aussie currency as a result.
IS THE EURO/AUSTRALIAN DOLLAR RIGHT FOR YOU?
Trading currencies online is a viable option for anyone looking to invest, regardless of their financial knowledge or experience. It is a great way to start your investment career from the comfort of your own home.
*This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.
*Past performance is not an indication of future results. All trading carries risk. Only risk capital you’re prepared to lose.