Australian dollar is crashing. Here's why
AUD/USD is nearing lows on the year. Find out what's behind this slide in Australian dollar by analyzing US dollar strength and Australia's correlation to China.
Key points
- AUD/USD is down over 300 pips from July's highs - trading under 0.6600
- Chinese stocks, highly correlated with AUD, are underperforming US stocks by 20%
- 4 out of 5 IG clients are long AUD/USD
AUD/USD below 0.6600
The pair has closed under 0.6600 every day in August so far. May 31st was the last close under that benchmark previously.
Chinese stocks and AUD
Australian dollar and Chinese stocks have been positively correlated consistently for the past three years - now sitting around +0.7. Chinese large cap stocks are down on the year, compared to a healthy gain of over 15% for the S&P 500.
Client sentiment
81% of IG traders holding positions in AUD/USD are long the pair. While US dollar remains strong, the majority of traders are anticipating a reversion toward the mean.
How to trade Australian dollar
- Open an account to get started, or practice on a demo account
- Choose your forex trading platform
- Open, monitor, and close positions on AUD pairs
Trading forex requires an account with a forex provider like IG. AUD pairs can be found in IG's platform under the 'Major' and 'Australasian' pairs tab. Many traders also watch major forex pairs like GBP/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.
You can help develop your forex trading strategies using resources like IG’s Trading Academy. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.
Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.
This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. See our Summary Conflicts Policy, available on our website.
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