What is AUD/CAD?
The AUD/CAD is the forex currency pair that represents the exchange rate between the Australian dollar (AUD) and the Canadian dollar (CAD). In forex trading, the AUD/CAD pair indicates how many Canadian dollars are needed to purchase one Australian dollar.
Trading the AUD/CAD pair allows traders to take advantage of the exchange rate fluctuations between the Australian and Canadian economies. However, it is important to note that forex exchange rates are not set in stone and that they can be influenced by a wide range of financial and political factors, some of which are interconnected.
What affects the price of the AUD/CAD pair?
The price of the AUD/CAD currency pair can be influenced by several factors, including:
- Economic data: Economic indicators such as Gross Domestic Product (GDP) growth, inflation rates, employment data, and trade balance can impact the value of both the Australian dollar and the Canadian dollar. Usually, positive economic data strengthens a currency, while a negative announcement can weaken it.
- Interest rates: The AUD/CAD exchange rate could be affected by central bank monetary policy decisions such as rate hikes by the Reserve Bank of Australia (RBA) and Bank of Canada (BoC). Higher interest rates tend to increase the demand for a currency.
- Commodity prices: Both Australia and Canada are known for being major commodity exporters of iron ore, coal, gold, oil, and natural gas. Changes in commodity prices can have an impact on the respective currencies. For example, Australia is a major exporter of gold, while Canada is known for its significant reserves of natural resources, including gold. As a result, fluctuations in gold prices can indirectly affect the AUD/CAD exchange rate.
- Political and geopolitical events: Political stability or instability, government policies, and geopolitical developments can affect investor sentiment and impact the exchange rate. Elections, changes in government, trade disputes, and geopolitical tensions can create volatility in the AUD/CAD pair.
- Risk sentiment and market speculation: As investors evaluate the relative stability and prospects of both economies, shifts in risk sentiment may have an impact on the AUD/CAD pair. Market speculation following patterns and trends in price charts, as well as trading volumes, can impact market participants' decisions.
What to watch out for when trading AUD/CAD?
When trading the AUDCAD forex pair (the Australian dollar against the Canadian dollar), there are several factors to watch out for. Here are some key considerations:
- Reserve Bank of Australia’s and Bank of Canada’s Monetary Policy Decisions
- Australia’s and Canada’s Employment Data and Gross Domestic Product (GDP)
- Australia’s and Canada’s Inflation figures as shown in the Consumer Price Index (CPI)
- Australia’s and Canada’s Trade Balance
- Organisation of Petroleum Exporting Countries (OPEC) meetings and oil inventory data
