Tag: Austrailian dollar

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Forex Assets

AUD/NZD – Everything About This Forex Currency Pair

Introduction

Introduction

Introduction

AUD/NZD is derived from the full-form of the currency pair, the Australian dollar, and the New Zealand dollar. It comes under the classification of cross currency pairs. In this pair, AUD is the base currency, and NZD is the quote currency.

Understanding AUD/NZD

The value of AUD/NZD depicts the value of NZD that is equivalent to AUD. It is simply quoted as 1 AUD per X NZD. For example, if the current value of this pair is 1.0405, then these many New Zealand dollars are needed to purchase one Australian dollar.

AUD/NZD Specification

Spread

Spreads are a typical way through which brokers make money. The pip difference between the bid price and the ask price is their profit margin, which is referred to as the spread. It varies from the type of account model.

ECN: 0.9 | STP: 1.8

Fees

The fee is basically the commission on a trade levied by the broker on each trade. Again, it varies from the type of account model.

Fee on STP = 0

Fee on ECN = 6 to 10 pips (starts from as low as one pip)

Slippage

The slippage is the difference between the broker’s executed price and the trader’s execution price. There is this variation as the order is executed using market execution. There are two reasons for slippage to take place.

  • Broker’s execution speed
  • Market’s volatility

Trading Range in AUD/NZD

Assessing the profit/risk is a great add-on to one’s trading analysis. With this, the trader can know how long he must before his trade performs. And below is the table that enables the analysis of it.

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can assess a large time period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

AUD/NZD Cost as a Percent of the Trading Range

This is one great application of the above table. By combining these values with the total cost of trade, one can determine variations in the costs by varying the parameters like volatility and timeframe.

ECN Model Account

Spread = 0.9 | Slippage = 2 |Trading fee = 1

Total cost = Slippage + Spread + Trading Fee = 2 + 0.9 + 1 = 3.9

STP Model Account

Spread = 1.8 | Slippage = 2 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 2 + 1.8 + 0 = 3.8

The Ideal way to trade the AUD/NZD

Before getting into finding the best way to trade this pair, let us comprehend what the above table has got to say.

The higher the magnitude of the percentages, the higher is the cost on the trade for that particular volatility and timeframe. The min column represents low volatility, and the max column represents high volatility.

It can clearly be ascertained from the table that the percentages are comparatively higher on the min column and lower on the max column. This means that the costs are high when volatility is low and vice versa.

But, it is not ideal to trade in neither of the two situations mentioned below.

When the volatility is high -> because of the risk involved
When the volatility is low -> because the costs are high

Now, to maintain a balance between all the parameters, it is best to trade when the pip movement is around the average values.

Furthermore, another simple way to reduce cost is by trading using a pending/limit order instead of market orders, as it will nullify the slippage on the trade. And this, in turn, will reduce the total cost of the trade as well.

Categories
Forex Assets

Understanding The EUR/AUD Forex Currency Pair

Introduction

Introduction

Introduction

EURAUD is a minor/cross currency pair traded in the forex market. EURAUD is the abbreviation for the euro area’s euro and the Australian dollar. The left currency, EUR is the base currency and the one on the right, AUD is the quote currency. The price of EURAUD basically tells the value of the Australian dollar.

Understanding EUR/AUD

The exchange rate of EURAUD shows the Australian dollars required to purchase one euro. It is quoted as 1EUR per X AUD. For example, if the value of EURAUD is 1.5995, it means that these many units of AUD are to be possessed by the trader to buy one unit of EUR.

EUR/AUD Specification

Spread

Spread is the way through which brokers make money. It is merely the difference between the bid price and the ask price set by the broker. These prices are often different from broker to broker. The spread differs based on the volatility of the market as well. The approximate spread on an ECN account and an STP account is given below.

ECN: 0.9 | STP: 1.7

Fees

For every trade a trader takes, there is some fee associated with it. And this fee is charged only by ECN type brokers. Typically, there is no fee on STP type brokers. The fee range is usually between 6 pips and 10 pips.

Slippage

A trader can place trades using either market order or using a limit order. In the case of market orders, the trader doesn’t get the exact price at which he executed the trade. The real price he received is different. This difference in the price is referred to as slippage.

Trading Range in EUR/AUD

As a professional trader, it is vital to know how many pips the currency pair moves in each timeframe. It gives the trader an idea of how long he must wait for his trade to perform. Traders can also assess their profit/loss in a given time frame. For example, if a trader takes a trade by analyzing the 1H timeframe, and the min market volatility is three pips, then he can expect to win or lose at least $20.91 (3 pips x $6.97 value per pip).

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can assess a large time period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

EUR/AUD Cost as a Percent of the Trading Range

Apart from knowing the potential profit/loss from the volatility of the market in different timeframes, one can also determine the cost variation by considering the volatility and the timeframe. For this, the ratio between total cost and volatility is taken into account. It is then expressed in terms of percentage. The magnitude of the percentage determines the cost of each trade.

ECN Model Account

Spread = 0.9 | Slippage = 2 | Trading fee = 1

Total cost = Slippage + Spread + Trading Fee = 2 + 0.9 + 1 = 3.9

STP Model Account

Spread = 1.6 | Slippage = 2 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 2 + 1.7 + 0 = 3.7

The Ideal way to trade the EUR/AUD

Now that we’ve got the values from the above table, here is our ideal way to trade the EUR/AUD.

The higher the magnitude of the percentages, the higher is the cost of the trade on that particular timeframe. Comprehending this to the above table, it is seen that the percentages are highest and lowest on the min and max columns, respectively. This, in turn, implies that the costs are high when the volatility of the market is feeble. And the costs are low when the volatility is high. So, it is ideal to trade on any timeframe, given the volatility of the market is above average volatility. This will ensure the fairly high volatility with affordable costs.

Furthermore, the costs can be made much lower by placing limit orders instead of market orders because this will reduce the slippage on the trade to zero. As an example, the cost percentage table is given by ignoring the slippage value.

Thus, comparing the two tables, it is evident that the costs have reduced by 50%.

Categories
Forex Market Analysis

The Germany ZEW Economic Sentiment could mark optimism for the Euro and other stories

Hot Topics:

  • GBP – The Unemployment rate in historic lows.
  • AUD – Waiting for the minutes of the last meeting of the Reserve Bank Board.
  • EUR – The Germany ZEW Economic Sentiment could mark optimism for the Euro. 

GBP – The Unemployment rate in historic lows.

On Wednesday 21th, the unemployment rate will be released. The analyst survey consensus does not foresee changes in respect to the last month’s data of 4.3 percent, the lowest in four decades. On the same day, the Bank of England (BoE) will release its Annual Inflation Report to the Treasury Select Committee. The BoE’s Governor, Mark Carney will speak in the British Parliament on the Annual Inflation Report to the Select Committee of the Treasury.

The pound reached a new low below 1.3978 and as long as it does not exceed 1.434, there is a high probability that it will fall back to new lows with a maximum target of 1.3448, which would coincide with the long-term bullish guidance.

GBP-USD 4-hour chart (click on the image to enlarge)

 

AUD – Waiting for the minutes of the last meeting of the Reserve Bank Board.

On Tuesday 20th, in the overnight session, the Reserve Bank of Australia (RBA) will publish the minutes of the last monetary policy meeting, where the members of the Reserve Bank Board decided to keep the interest rate unchanged at 1.50%. Although members observe the growth of employment, and the unemployment rate has remained at a minimum, they conclude that inflation is still below the target goal of the RBA.

The AUDUSD pair could be developing a corrective structure in the form of A-B-C, which could lead to 0.765, once it reaches this area, it could again be a new connector of a higher degree leading to new highs.

AUD-USD 4-hour chart ( click on the image to enlarge)

 

EUR – The German ZEW Economic Sentiment could mark optimism for the Euro.

In January, the German Economic Sentiment Index ZEW reached its highest point in 8 months, marking 20.4 points, increasing the expectation in the economic environment for the first half of the year. For this month, the analysts’ consensus expects it to fall to 16 points. However, considering the last GDP (YoY) in Germany reached 2.3%, and in the Eurozone which reached 2.70% (YoY), we expect the ZEW index to continue at the same level as that registered in January.

The single currency could mark a new maximum that could reach 1.2646, thus completing a sequence of five movements. After this, we could expect a corrective move for the Euro. However, we should expect all pairs against the Euro to be “aligned” before starting a more profound corrective process for the euro.

EUR-USD 4-hour chart ( click on the image to enlarge)