Bearish Trade Idea For AUD/USD

Learn all about how the AUD/USD works in this article! The past few week's we've been diving into stocks, crypto, NFT's and now even forex! We will go over how stock traders can use the AUD/USD's price movement to help them with their stock trading! We also have a bearish AUD/USD trade idea for you at the end!!

February 2, 2024
Meta Matt
Keep Reading To Learn About The AUD/USD

Why We Are The Watching AUD/USD

We've been diving into forex like our EUR/USD trade idea, crypto like our Bitcoin Analysis, and even NFTs like our latest blog post on Seiyans NFT. Of course we've also talked about Amazon, Google, META, Uber, and other great stocks in our past blogs. Today we will be talking about Forex again, as we have an AUD/USD trade idea for you! Before we get into what our trade idea for AUD/USD is, let's talk about what AUD/USD is.

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What Is The AUD/USD?

In the ever-evolving landscape of global finance, the AUD/USD currency pair, nicknamed the "Aussie dollar," stands as a key indicator of economic health and investor sentiment.

Understanding the Fundamentals:

The AUD/USD reflects the exchange rate between the Australian Dollar (AUD) and the US Dollar (USD). If you don't know how currency pairs work, check out our blog that goes over all of it in detail! This rate fluctuates constantly, influenced by economic, political, and social factors:

  • Economic Divergence: Differences in interest rates, inflation, and GDP growth between Australia and the US.
  • Commodity Dependence: Australia's significant commodity exports, like iron ore and coal, tie the AUD to global commodity prices.
  • Risk Sentiment: During periods of heightened risk aversion, investors seek safe-haven currencies like the USD, impacting the AUD.
  • Central Bank Policy: Interest rate decisions and policy pronouncements from the Reserve Bank of Australia (RBA) and the Federal Reserve (Fed) can trigger significant price movements.
  • Political Events: Elections, trade deals, and geopolitical tensions can introduce uncertainty and affect currency valuations.

Trading the AUD/USD:

For experienced forex traders, the AUD/USD presents a lot of opportunities due to its:

  • Liquidity: As a highly traded pair, the AUD/USD offers many trading opportunities throughout the day.
  • Volatility: While less volatile than some pairs, the AUD/USD provides enough price movement for active trading strategies.

There are several ways to trade the AUD/USD, and the most common exchange you choose depends largely on your individual needs and preferences. Here's a breakdown:

  • Spot Forex: This involves buying and selling currencies outright, aiming to profit from changes in the exchange rate.
  • Forex CFDs: Contracts for Difference allow speculating on price movements without owning the underlying currency. Leverage can amplify profits and losses, so use them cautiously.
  • Futures and Options: These financial instruments offer more complex ways to hedge against risk or speculate on future price movements. They require greater experience and risk management expertise.

There are many exchanges out there that offer forex trading:

  • Brokers: Online platforms like MetaTrader and cTrader offer user-friendly interfaces and educational resources for beginner and experienced traders. Popular options include IG, CMC Markets, Interactive Brokers, Forex.com, OANDA, Pepperstone, TD Ameritrade, E-Trade, and FXTM. There is also FX Pro.
  • E-CNFX (Electronic Communication Network Foreign Exchange): These platforms connect multiple providers, offering competitive prices and deep liquidity. Examples include Hotspot FX and FastMatch FX.
Technical Analysis Is A HUGE Part Of Forex Trading

How Stock And Crypto Traders Can Use The AUD/USD

Even for non-forex traders, the AUD/USD holds significance. In order to figure this out, we first need to figure out which types of companies might benefit or struggle based off of the AUD/USD movement.

Strengthening AUD/USD (Australian dollar appreciates):

  • Sectors potentially benefiting:
    • Australian exporters: Companies that sell goods and services overseas in USD benefit from a stronger AUD, as their sales translate to more AUD when converted back. Examples include resource exporters like BHP Group (BHP) and Fortescue Metals Group (FMG), or travel and tourism companies like Qantas Airways (QAN).
    • US importers of Australian goods: Companies in the US that buy goods from Australia see their costs decrease in USD terms when the AUD strengthens. This could benefit retailers selling Australian products or manufacturers using Australian inputs.
  • Sectors potentially struggling:
    • US exporters to Australia: US companies selling goods and services to Australia face higher costs in AUD terms when the AUD appreciates, potentially impacting their competitiveness.
    • Australian import-reliant companies: Businesses in Australia that rely heavily on imported goods could see their costs rise when the AUD strengthens, impacting their margins.

Weakening AUD/USD (Australian dollar depreciates):

  • Sectors potentially benefiting:
    • US exporters to Australia: US companies become more competitive in the Australian market when the AUD weakens, potentially boosting their sales.
    • Australian import-reliant companies: Lower import costs due to the weaker AUD can improve profitability for such companies.
  • Sectors potentially struggling:
    • Australian exporters: Their USD earnings translate to less AUD when the AUD weakens, impacting their profitability.
    • US importers of Australian goods: Higher costs in USD terms due to the weaker AUD could squeeze their margins.

Now that we know what types of companies might benefit from a weakening/strong AUD/USD, let's give some examples of some companies that might fit that criteria:

Australian Exporters to the US:

  • BHP Group (BHP): Major exporter of iron ore, copper, and other commodities to the US steel industry.
  • Fortescue Metals Group (FMG): Significant portion of iron ore output shipped to US steelmakers.
  • Treasury Wine Estates (TWE): Exports popular Australian wine brands like Penfolds and Wolf Blass to the US.
  • Endeavour Group (EDR): Owner of iconic Australian brands like Bundaberg Rum and Yellow Tail wine, exports significantly to the US.

US Exporters to Australia:

  • Boeing (BA): Supplies commercial airplanes to major Australian airlines like Qantas and Virgin Australia.
  • General Motors (GM): Exports Chevrolet and Holden vehicles to Australia (Holden production recently ceased).
  • Pfizer (PFE): Supplies various medications and healthcare products to the Australian market.
  • Microsoft (MSFT): Provides software and cloud computing services to businesses and individuals across Australia.
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How Our Exclusive In-House Analysts Are Trading AUD/USD

AUD/USD

"I am bearish on AUD/USD at these levels. I am personally already in a short position, from a market order yesterday. For those who are also bearish, one option would be to wait for $0.65250 to fail as support. I am looking to trade this back down to $0.63913. If we break $0.66253 I personally will stop out." -BTC_JAY

Trade Idea: Bearish/Short
Entry: Current Price Levels ($0.65840)
Targets: $0.63913, $0.62701, $0.61704
Stop Loss: $0.66253

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