As a forex trader, understanding the factors that drive my decision to purchase a particular currency pair is crucial. One such currency pair that I have been closely monitoring is the AUDCAD. The AUDCAD is the exchange rate between the Australian dollar and the Canadian dollar. In this article, I will discuss the factors that have influenced my decision to purchase the AUDCAD.
Economic Indicators
One of the primary factors that I consider when purchasing a currency pair is the economic indicators of the countries involved. In the case of the AUDCAD, I have been monitoring the economic indicators of both Australia and Canada. These indicators include GDP, inflation rates, employment rates, and interest rates.
Australia has been experiencing steady economic growth over the past few years, with a GDP growth rate of 2.3% in 2019. Additionally, Australia’s unemployment rate has remained relatively stable at around 5%, while inflation has been hovering around 1.5%. On the other hand, Canada’s GDP growth rate was 1.6% in 2019, with an unemployment rate of 5.7% and an inflation rate of 1.9%.
Based on these economic indicators, I believe that Australia’s economy is stronger than Canada’s, which makes me more inclined to purchase the AUDCAD.
Commodity Prices
Another factor that I consider when purchasing a currency pair is commodity prices. Both Australia and Canada are major commodity exporters, with Australia exporting iron ore, coal, and natural gas, while Canada exports oil and natural gas.
Commodity prices can have a significant impact on a country’s economy and currency value. For example, if commodity prices increase, it can lead to an increase in export revenue, which can strengthen a country’s currency.
Currently, iron ore prices have been on the rise, which is beneficial for Australia’s economy. On the other hand, oil prices have been volatile due to geopolitical tensions and the COVID-19 pandemic, which has had a negative impact on Canada’s economy.
Based on these commodity price trends, I believe that the AUDCAD is a favorable currency pair to purchase.
Political Stability
Political stability is another factor that I consider when purchasing a currency pair. Political instability can lead to economic uncertainty, which can negatively impact a country’s currency value.
Australia and Canada are both considered politically stable countries, which is a positive factor for both currencies. However, Canada has been experiencing some political turmoil in recent years, with the resignation of former Prime Minister Justin Trudeau’s cabinet members and the ongoing dispute with Indigenous communities over pipeline construction.
While this political instability has not had a significant impact on Canada’s economy or currency value, it is still a factor that I consider when making my decision to purchase the AUDCAD.
Conclusion
In conclusion, understanding the factors that drive my decision to purchase a particular currency pair is crucial as a forex trader. In the case of the AUDCAD, I have been monitoring economic indicators, commodity prices, and political stability. Based on these factors, I believe that the AUDCAD is a favorable currency pair to purchase. However, it is important to note that the forex market is volatile and unpredictable, and these factors can change rapidly. Therefore, it is essential to stay informed and adapt to changing market conditions.
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