The EUR/AUD pair is somewhat contradictory. However, in the conditions of the modern economy, it can become the right choice for those preferring bets with a risk, which is higher than the medium one and with a right margin. To get into the topic better, you should realize which factors the Australian dollar depends on.
Why should you do this? The matter is that in the pair with the euro, it’s the AUD, which seems to be more attractive for analysis. The EU currency isn’t tied to any factors except bank manipulations. That’s why it looks more stable compared with the weak Australian dollar.
The cost of AUD changes because of variations in the interest rates. It’s a relative benefit, which is obtained by the investor when he invests in the assets of one country compared with another one.
For instance, if the interest rates in Australia equal 1,50%, while in the EU, they equal 2,40%, the investor can obtain a more significant profit if he gains the assets in Europe. This provokes the lowering of AUD’s cost because the investors sell AUD and buy the euro.
Over time, AUD went for the prices for the export of Australian primary natural resources and collective efforts of the country’s trade. Why did it happen this way? To get the Australian trading, it’s trading partners had to buy AUD and trade the local currency to process the transaction.
We can also see that prices for iron support the power and fragility of AUD during a couple of decades. It also has to deal with the tides of Chinese demand.
The credit rate of the Australian authorities can insignificantly influence AUD. The reason is that the credit rating has an impact on its debt profile risk. It affects the sum, which the government has to pay for the debt it has to return.
Unwell credit rating makes the purchase of the country’s debt riskier and less attractive, which lessens the total demand for its currency.
Even if it’s not an issue in the recent time (the Australian authorities hold the credit rating of AAA for more than 15 years), the events threatening this status led to the short-term weakness of AUD in the past.
The Australian dollar is in the top five traded currencies on Forex. There are a couple of reasons for that, but the most obvious one is represented by the fact that AUD is the indicator of growth and risks in the world financial markets.
It’s like a barometer and trading instrument used to obtain a profit from the short-term changes of the situation speaking of the worldwide economic and market growth.
It’s partly connected with the fact that the economy of Australia (as a trading currency) is prone to severe changes in the world’s economic activity.
Subsequently, when the situation on the market is good, AUD often rises, and if it’s a bad one, it falls. It’s the same with the euro.
Let’s look at the situation with the rate in 2019 as an illustration. In January they gave 0,65 euros for 1 AUD, but when the trading war of the US became more apparent, the rate of the Australian dollar concerning the euro weakened and lowered to 0,61 EUR for 1 AUD to July.
It is often claimed that AUD climbs the escalator and downs he elevator shaft. To be specific, when it grows, it does it slowly, but when it falls, it happens suddenly. The curve of the rate graph supports the statement for the last five years.
Trading with the dollar of Australia is thought to be somewhat risky as a result, especially compared with the man analogs of G4. It is especially seen in the EUR/AUD pair, as long as the euro is also prone to sudden jumps and shifts.
Nevertheless, AUD has high variability. That’s why, for the risky ones, trade with AUD can bring excellent opportunities to speculate on the changes in the world financial markets.