The EUR/AUD currency combination is the most recent currency pair of the current generation in the forex market. The EUR/AUD currency pair is generally known as a minor pair throughout the forex marketplace as it is not associated with big currencies like the USD. It is also not an exotic pair due to the solid global position of the currencies.
Minor currency pairs, such as the EUR/AUD, reduce the cost of converting from one currency to another by eliminating the need to convert to USD and then back to the other currency.
Minor pairs such as EUR/AUD are attractive for forex trading because of their isolation and the volatility in currency strength. Minor pairs are typically more volatile than major pairs, allowing traders to profit from large fluctuations in conversion rates.
One of the most tempting qualities of forex investment is the chance to trade 24 hours a day, seven days a week. However, trading EUR/AUD is not always a wise idea regardless of the time of day. The optimum time to trade them is when the spreads are the smallest when currencies are most volatile and liquid.
Background of EUR/AUD
Though the EUR/AUD currency pair is relatively new, it has proven to be trending and popular. This has been popular for both veterans and newcomers alike in the modern currency trading market.
The EUR is relatively new and was first materialized at the beginning of the 20th century. It began to gain popularity towards the end of the century. The EUR was first introduced as only a digital currency and then turned into notes and coins after gaining popularity. Currently, EUR is a common currency for a large proportion of Europe. Its popularity skyrocketed and later became one of the world’s leading currencies. Due to this reason, the EUR is one of the most popular candidates within the forex trade market.
The Australian pound was the predecessor of the Australian dollar in 1966. The government of Australia decided to replace their old imperial currency with the AUD. Later on, in 1983, the AUD became a floating currency. The conversion rate of the AUD in 1966 was A$2 per = A£1. In 2015, the Australian dollar was the fifth most traded currency in the marketplace, with 6.69% of the daily share throughout the world. Now due to the strong economic balance of Australia, the Australian dollar has proven to be a very strong and influential currency.
How to Trade EUR/AUD Pair
Before you start learning how to trade, you must first look for a broker. This often takes a lot of time and research because there’s an endless pool of forex brokers out there. Here are three of the most popular brokers on the market.
The IFSC and the CySEC oversee and regulate RoboForex. You can choose between the six different account types when you sign up with this broker. One of these accounts. If you’re looking to test the platform first, sign up for a free demo account that comes with virtual funds.
You can start trading with RoboForex for as little as $10. It allows you to choose from a leverage range of 1:400 to 1:2000. The platform comes in the form of a mobile application or desktop software. It provides live chat and email support 24 hours a day, seven days a week.
Vantage FX is a well-known broker that is regulated by the Vanuatu Financial Services Commission (VFSC) and the Australian Securities and Investments Commission (ASIC). Its user-friendly interface, which can be accessed on any mobile or desktop device, has made it popular among traders. It has no known inactivity or withdrawal fees, and the site includes several lessons and a live chat option for contacting customer service experts.
Markets.com is a CySEC and FCA-regulated broker with a user-friendly site perfect for novices. It has a knowledgeable customer support system that is easy to reach. The site includes helpful tutorials and a variety of trading tools that can assist you in analyzing the market or developing new trading strategies.
Let’s move on to how to trade this specific currency pair now that you’ve tried out the brokers mentioned above and decided on one.
The foreign exchange marketplace is open and functional 24 hours a day. But due to the different time zones, UK trading starts to pick up the pace at around 8 am. Similarly, at around 5 pm, the market begins to lose its pace and becomes monotonous. Trading volumes fluctuate throughout this time as different, major announcements about the economy and the market are made. Investors and individuals can make the most out of their time by hawking at the news that might be released live.
The EUR/AUD combination is one of the most popular currency pairs to date. It is also one of the most important and most traded pairs in the foreign exchange market. Being one of the most versatile currency pairs, the EUR/AUD currency pair is most popular among newcomers and also veterans.
Trading in the forex marketplace involves understanding the market thoroughly. In the marketplace, the currency pair can be considered as a whole. It is considered as an instrument that is bought or sold. A forex broker allows you to buy the base currency and sell the quote currency when you buy a currency pair. Again, when you sell the currency pair, you sell the base currency and receive the quote currency. In doing so, you make a profit or loss.
Currency pairs are quoted based on their buying and selling prices. The buying price is when the forex broker will buy the base currency from you in return for the quote or counter currency. The selling price is the broker’s price to sell you the base currency in exchange for the quote or counter currency.
You’re selling one currency to buy another when trading. Simultaneously, when trading stocks, you’re using cash to buy a unit of that stock or several shares of a particular stock. Therefore, many factors and issues can affect the EUR/AUD pairings exchange rate within the forex marketplace. These factors can be unique to each pairing. For the EUR/AUD pairings, factors such as interest rate, employment number, political and economic factors, and health factors of a country play a vital role in influencing the price of the pair.
Role of interest rates affecting the EUR
For the EUR, interest rates play a vital role in affecting the EUR/AUD exchange rate. For this reason, investors, traders, and many financial institutions pay undivided attention to the European Central Bank. In doing so, they can predict future exchange rates and make decisions accordingly. The European Central Bank also releases monthly reports regarding rates of currency. The public uses these financial statements to predict the market shift of the EUR/AUD.
The other factor that affects the exchange rate of EUR/AUD is the employment number of the nation. Due to unemployment, the central bank might reduce the interest rate of the EUR, weakening the currency. Due to this reason, the employment number of the population is vital information for investors and financial institutions.
Role of AUD affecting the exchange rate
For the AUD, political and economic factors might affect the value of AUD, ultimately affecting the exchange rate of the EUR/AUD currency pair. Investors and financial institutions look out for Australia’s import and export industries for such reasons. One of the main reasons for the Australian dollar to remain strong is the prominent import and export industry. Export of ores such as coal, iron, and other commodities played a vital role in backing the Australian economy.
On the other hand, the economy’s health also plays an unequivocal role in affecting the value of AUD. Data relating to the economy’s health is always an important handbook for traders. The Reserve Bank of Australia is responsible for deciding the value of the Australian dollar at any particular time. Another factor to consider is Australia’s unforeseen low-interest rates on government debt.
Different strategies for forex trading of EUR/AUD
Forex trading strategies allow you to properly analyze the market and help you determine the best entry point and exit point. Strategies can also help predict future market performance with the help of technical indicators which a trader can use. Depending on different goals and objectives, a knowledgeable and experienced trader will often include portions of different analysis types and a wide variety of trading methods.
But there are no ‘best forex strategies’. Oftentimes, traders merge different strategies to come up with their formula. Trading strategies only help a trader to navigate effectively through different markets. By putting together factors such as when and what indicators you would like to trade on, you start to develop forex strategies. Once you have put together a strategy, you can start identifying patterns in the market and applying your strategies effectively. Likewise, thousands of people have made their strategies, of which some are popular. Just like other currency pairs, EUR/AUD can also be used through different strategies.
News trading strategy
A news trading strategy is the trading of currencies like EUR/AUD, solely based on news and market expectations, both before and after. This strategy requires a tremendous skilled mindset and sharp instincts to properly exploit this strategy as news can travel quickly on digital media. If this strategy is used, traders will need to quickly assess the news after being released. They must also make a quick judgment on how and when to trade it.
Keeping these in mind, one must properly assess the news thoroughly. For the EUR/AUD currency pair, one must keep track of the economy of both the UK and Australia. Things like financial assessments of the European Central Bank and the trading economy of ores, irons, and other metals within Australia must be kept right under constant surveillance.
This strategy must be used before the news arrives, if possible. An investor may be able to avoid volatility after a rumored announcement if he or she does this.
- A specified entry and exit strategy: Entering and exiting a trade are based on how the market reacts to the news, which is commonly portrayed in a trader’s plan.
- Many trade opportunities. Every day, several news events and economic releases can provide trading opportunities. You can follow important news announcements by monitoring economic calendars found on the internet.
- Overnight risks: The type of news can influence trading positions. They may be open for several days. Positions that are left open overnight might be at risk.
- Trading news necessitates a high level of expertise: News traders need to understand how certain announcements might affect their positions, including the overall financial market. They should also have the capability to understand news from different perspectives and not only subjectively.
End-of-day trading strategy
The end-of-day trading strategy is the strategy of trading near the end of markets. At the end of the day, it might become clear whether the exchange rate of EUR/AUD is going to settle or close. That’s why traders must become active when the market reaches almost the end of the day.
This trading strategy requires less time commitment than other trading strategies. Due to this, there is only a need to study charts at specific times. Also, this strategy must be used during the opening and closing times.
This strategy requires studying the price differences of EUR/AUD in comparison to the previous day’s prices. Through this strategy, traders can then predict how the price could move based on the price action and decide on any action they might need to take. Traders must calculate different risk management orders, including a limit order, a stop-loss order, and a take-profit order to reduce any overnight loss.
- Easier for most traders: This trading strategy might be perfect for newcomers, as there is no need to enter multiple positions.
- Less time commitment: Traders can study the charts and make market orders either in the morning or at night. Therefore it is significantly less time-consuming in comparison to other strategies.
- Overnight risk: Overnight positions can cause traders to incur more risks.
Swing trading strategy
Swing trading is a strategy for trading both sides of the EUR/AUD currency pair on the financial market. Traders use this method to acquire security when they believe the market will rise. If they don’t, they can sell the asset if they believe the price will fall. Swing traders profit from the market’s movement as the price fluctuates between overbought and oversold levels. Swing trading is primarily a technical strategy to market analysis that involves quick decisions based on chart analysis and individual movement analysis.
To trade swings successfully, one must evaluate the length and duration of each swing of the EUR/AUD since these determine the relevance of support and resistance levels. Swing traders must also be aware of market patterns in which supply or demand is increasing. Traders observe if momentum improves or drops within each swing while watching trades.
- It’s viable as a hobby: Swing trading may be more ideal for those who are pressed for time. Understanding how oscillation patterns work, on the other hand, necessitates considerable research.
- Many trade opportunities: Swing trading allows traders to trade both sides of the market, going long and short on many assets.
- Overnight risk. Some trades will be held overnight and might incur additional risks. The risks can be reduced by placing a stop-loss order on your positions.
- It requires ample research and basic knowledge: A hefty amount of research and knowledge is required to understand how to analyze markets. This is because technical analysis is based on various technical indicators and patterns.
Day trading strategy
Day trading is for traders who like to trade during the day as full-time professionals. Intraday trading is another name for it. These traders profit from the market’s price changes between the opening and closing hours. This is ideal for the EUR/AUD pair in general. Day traders frequently have numerous open positions during the day, but they do not keep them open overnight. This is done to reduce the danger of market volatility overnight. Day traders should stick to a trading plan so that they can quickly adjust to changing market conditions.
Traders should try to research the support and resistance levels, possible reactions to the previous night’s trading in Australia and moves that have occurred in the Far Eastern markets just before the opening of the FTSE other European markets. The majority of traders prefer totrade European markets in the first two hours of trading when liquidity is highest.
- No overnight risk: No trade is left open overnight in day trading.
- Limited intra-day risk: Traders only enter into short-term deals. These typically last 1 to 4 hours, reducing the risks associated with longer-term trades.
- Time flexibility: Day trading may be a good fit for those who need a lot of flexibility in their trading. A day trader may open one to five positions during the day and close them all when their objectives are met.
- Multiple trade opportunities: Day traders use both local and international markets, and they can initiate and close many positions throughout the day, including taking advantage of currency market hours that are open 24 hours a day, seven days a week.
- Requires discipline: Trading intraday necessitates self-control. To manage their risk, traders should follow a pre-determined strategy that includes entry and exit points.
- Flat trades: This is when, as is to be expected, some positions do not change during the day.
Trend trading strategy
When a trader uses technical analysis to detect a trend and only trades in that direction, they are using this strategy. This method is very useful because the EUR/AUD currency pair follows a trend.
Trend traders have no fixed view regarding where the market should go or in which direction it should move. Because the trend can shift quickly, staying vigilant and adaptable is critical. Trend traders should be aware of the dangers of market reversals, which can be reduced by using a trailing stop-loss order.
Trend traders will need to be patient, as this strategy can be difficult to master. If they have enough conviction in their trading method, the trend trader, on the other hand, should be able to be disciplined and follow their rules. It’s also critical to recognize when your system has failed. This normally occurs due to a fundamental market shift. Thus it’s critical to keep your losses short and let your wins run while trend trading.
- Useful hobby: After their trend recognition system has been built, trend trading is excellent for persons with limited time.
- Abundant trade opportunities. A dominant trend may provide many entry and exit points for a transaction. Trend trading may also entail taking both sides of the market.
- Overnight risk: As trend trades are frequently open for several days, they may be more vulnerable to overnight risk than other strategies.
Scalping trading strategy
When using this strategy, traders engage in very short-term trades with minor price changes of the EUR/AUD. Scalpers try to scalp a small profit from each trade in the hopes of compounding the modest earnings. As a scalper, you must have a disciplined exit plan because a huge loss might wipe out many other profits that have been built up over time. Scalping is a popular strategy for trading currency pairs on the forex market.
Scalpers do not follow the usual adage of “letting your winnings run,” as they take their profits before the market has a chance to move. Traders exit the market with little profit from selling the EUR/AUD currency. Because scalpers often operate on a risk/reward ratio of roughly 1/1, it’s normal for them to focus on raising the total number of smaller winning transactions rather than making a significant profit for each deal.
- No overnight risk: Scalpers don’t hold positions overnight, and most trades are only a few minutes long at most.
- Perfect for hobbyists: Scalping is ideal for those who wish to trade on the fly.
- Abundant trading opportunities: Scalpers start multiple small positions with a less defined criterion than other methods, resulting in a large number of trading opportunities.
- Limited market applicability: Only certain markets, such as indices, bonds, and some US equities, are suitable for scalping. Only when there is a lot of volatility and trading volume is scalping lucrative. Learn everything there is to know about trading volatility.
- Requires discipline: Scalping needs traders to be extremely disciplined because it requires greater position sizes than other trading methods.
- Extremely tense environment: Keeping an eye on even the tiniest price changes in the hopes of making a profit may be a very demanding activity. As a result, it is not recommended for new traders.
Position trading strategy
Position trading is a popular trading method in which a trader holds a long-term position in the EUR/AUD, frequently months or years, ignoring minor price changes in favor of benefitting from long-term trends. Position traders typically employ fundamental analysis to assess probable market price developments, but they also analyze other aspects, including market trends and historical patterns. The EUR/AUD pair’s prices may fluctuate, resulting in huge winnings.
- High profits: Because the risk of making a mistake is lower in position trading than in traditional trading, traders can employ higher leverage, making higher profits
- Less stress: One of the most appealing aspects of position trading is that it eliminates the need to review positions regularly.
- Significant loss: Minor swings, which can turn into full trend reversals and result in severe losses, are often overlooked by position traders.
- Swap: The swap is a fee that the broker receives. Swaps can collect a significant amount if the position is open for a long time.
RANGE TRADING STRATEGY
Identifying support and resistance areas of the EUR/AUD, where traders will place trades around these critical levels, is the definition of range trading. The key instrument employed in this method is technical analysis. This strategy works well because the EUR/AUD currency pair’s trend is very stable.
Range-bound methods can work for any time frame. Therefore there is no set length for each trade. As breakouts are common, risk management is an important aspect of this strategy. As a result, a range trader would close all current range-bound trades. Range trading can result in profitable risk-reward ratios, but it requires a long-term investment in every transaction.
- A substantial number of trading opportunities: Trading ranging markets’ dips and surges can be a reliable and profitable technique.
- Favorable risk-to-reward ratio
- Requires lengthy periods of investment
- Entails strong appreciation of technical analysis
CARRY TRADE STRATEGY
Carry trades entail borrowing one currency of the EUR/AUD pair at a lower rate and then investing in the other currency at a greater yield. As a result, positive trade carried is assured. The FX market is where this method is most commonly applied.
Carry trades are based on interest rate differentials between the EUR/AUD currencies; hence, the trade length favors the medium to long term.
Carrying trades perform best in strong trending markets because the approach requires a longer time horizon. Before entering the EUR/AUD trade, the first step should be to confirm the trend. A carry trade involves currency rate risk and interest rate risk. As a result, the optimal time to open positions is at the beginning of a trend to fully benefit from exchange rate fluctuations. In terms of the interest rate component, regardless of the trend, the trader will still receive the interest rate differential if the first currency has a higher interest rate than the second currency.
- Little time investment is needed.
- Median risk-to-reward ratio.
- Entails strong appreciation of the forex market
- Infrequent trading opportunities
Breakout trading strategy that aims to profit from a new trend in a certain currency pair, such as the EUR/AUD, as it emerges. This type of strategy is known as grid trading. Unlike other breakout trading tactics, Grid trading does not require knowledge of the trend’s direction.
Grid trading strategists profit by creating a network of stop orders both above and below the current market price. This network of stop orders above and below ensures that one order will be activated in response to any price movement.
Before establishing buy and sell stop orders, traders will first identify support and resistance levels and use this bracketed range as a reference for placing orders at regular intervals. Support and resistance levels can be calculated using technical analysis or inferred by drawing trend lines on a price graph to link price peaks and support levels. Because grid trading does not need knowledge of the breakout direction, orders can be made ahead of time. After the market closes, grid traders often prepare their strategy and make orders for the next day ahead of time.
- There’s no need to guess which way the EUR/AUD currency market will go. You don’t have to be hooked to your computer to make money.
- Careful oversight is required.
- Traders must also consider the costs of maintaining several open positions.
Forex trading requires you to have immense knowledge to make substantial profits. Forex trading veterans have memorized and made thousands of strategies to help them navigate throughout the whole forex marketplace. If you consider doing this as a full-time job, this form of trading also demands patience and time.
Being one of the most popular currency pairs in recent times, the EUR/AUD pair is popular among new as well as veteran traders. All of the above strategies mentioned apply to the EUR/AUD currency pair. If you are considering dipping your toes into the ocean of forex trading, then learning these strategies and applying them to beginner-friendly currency pairs like EUR/AUD is necessary.
That being said, day trading or swing trading in small quantities in the FX market is easier than in other markets for traders with modest funds. Long-term fundamentals-based trading or a carry trade can be successful for those with larger funds and longer time horizons.