The wonder of modern technology means it’s possible to play the financial markets from the comfort of your own home. Using our recommended forex brokers, you can trade a variety of currencies, including the Euro and Aussie Dollar. In this guide, we’ll explain EUR/AUD forex trading and how you can get into the action today.
WHAT IS EUR/AUD FOREX TRADING?
EUR/AUD is regarded as a minor pair. In forex trading, minor pairs are those that aren’t paired with USD. However, despite the classification in technical terms, the Euro and the Australian Dollar aren’t diminutive. The Euro is the second most traded currency in the world and the Aussie Dollar is the fifth most traded.
Trading EUR/AUD means that you’re assessing the value of one currency against another. In this instance, you’re comparing the value of the base currency (EUR) against the quote currency (AUD). Another way of saying this is that you’re establishing how much AUD it takes to buy €1. Therefore, as the value of both currencies changes, the EUR/AUD forex trading price will change. This is how you can make money by speculating on this minor currency pair.
The EUR to AUD exchange rate goes back to 1999 and the launch of the Euro. The first EUR/AUD price was €1/AU$1.84. As of April 2021, the historical high for this pair occurred in 2008 after the exchange rate hit €1/AU$2.01. For the latest EUR/AUD price, check out our live chat below.
The History of EUR/AUD
We can trace the history of EUR/AUD back to 1999 because that’s when the Euro was launched. However, the links between Europe and Australia go back further than that.
In the days before the Euro, European countries traded with Australia on an individual basis. For example, there would have been markets for the German Deutschmark vs. the Aussie Dollar.
Before that, the exchange rate between European currencies and the Aussie Pound was of interest. Indeed, Australia swapped the Australian Pound for the Dollar in 1966.
A year later it pegged the value of the Aussie Dollar against the US Dollar. Finally, in 1983, AUD became a floated currency.
The evolution of the Euro and Aussie Dollar means that the two are now tradable commodities in the forex world. Using the best online trading sites, you can speculate on the value of EUR/AUD increasing or decreasing.
Moreover, you can use features such as leverage to get full market exposure for a small stake, something we’ll explain in the following sections.
Factors that influences EUR/AUD
The price of EUR/AUD can and will fluctuate daily. This is the nature of forex trading and something you should expect when you enter a position. The reasons for these fluctuations will vary but is often based on political and socioeconomic factors.
For example, a trade dispute between Europe and Australia could hurt the value of both currencies. Conversely, positive political deals between the two countries could help the value of EUR/AUD.
Something important to note is that EUR/AUD will be directly affected by events that happen in Europe and Australia, as well as those that take place between the two.
There will also be events that happen outside of both countries that can impact the price of EUR/AUD. For example, Europe has close ties to the UK and the US, as does Australia.
If there was unrest among their allies, the Euro and the Aussie Dollar can be affected.
Role of the Euro
The Euro united members of the European Union under a single currency system. Although only 19 of the block’s 27 member states use the Euro, it has become the second most powerful currency in the world behind the USD. In fact, more than 340 million use EUR every day.
Like all currencies, the Euro is both a unit of value exchange i.e. something you use to pay for goods and service. It’s also a marker of economic strength. What’s interesting about this currency is that it sets the groundwork for united fiscal policies.
All countries that use the Euro have identical interest rates as set out by the European Central Bank. Moreover, the EU is regarded as a “single market” with regards to trade. In turn, this means the Euro is significant in global trade deals.
Role of the Australian Dollar
AUD, like the Euro, is a unit of value exchange and a marker of economic strength. This means its value is determined by Australia’s GDP, trade deals, employment rates and economic output.
A change in any one of these will impact the Australian economy and, therefore, the value of AUD. So, if you’re trading EUR/AUD, you need to keep tabs on anything that can affect these socioeconomic factors both in Australia and Europe.
Strategies for Forex: Trading EUR/AUD Online
To trade EUR/AUD you need to have a clearly defined strategy. This includes thinking about the potential risks, assessing the available data and knowing when to close your trades.
When to Buy and Sell EUR/AUD
No one can tell you when to buy and sell this minor currency pair because the dynamics are always changing. What you can do, however, is weigh up the variables before you open a trade.
The variables you focus on will depend on your trading style. Some people like to use news, current events and expert insights.
Others take a more empirical approach and focus on price charts and technical indicators. In reality, the best strategy is to combine the two approaches.
Use empirical data and subjective data such as professional tips and new stories. EUR/AUD forex trading is both an art and a science. Therefore, you should draw from as many sources as possible.
How to Trade EUR/AUD
Every trader needs an online forex broker. Our recommended trading sites will give you the means to access the markets. From there, you need to decide on your starting stake and then speculate on the EUR/AUD price increasing or decreasing. You can do this by making one of two choices:
Buying a forex pair is also known as going long and means you think the value of your pair will increase. So, when it comes to the EUR/AUD forex trading pair, a buy order means you believe the Aussie Dollar will appreciate against the Euro.
Selling a forex pair is also known as going short and means you think the value of your pair will decrease. So, when it comes to the EUR/AUD forex trading pair, a sell order means you believe the Aussie Dollar will depreciate against the Euro.
How to Calculate Forex Profit
To calculate forex profit, you need to take into consideration your stake and how many pips difference there is between the opening price and closing price. Pips are simply numbers after the decimal point.
So, if the price went from 1.1135 to 1.1140, the price has moved 5 pips. If you opened a long position for £10, you’d make £0.50 profit (10 X 0.05). Similarly, if you held a £1,000 long position, you’d have made £50 (1,000 X 0.05).
If the price increased and you held a short position, you’d lose money at the above rate. Therefore, your job is to decide whether the value of EUR/AUD will increase or decrease. Once you’ve done that, the difference in price between the open and close point will determine if you’ve made a profit or a loss.
Closing Your Position: Taking a Profit or Cutting Losses
The best online forex brokers will offer a combination of manual and automatic closing options. Manual means that you close trades whenever you like.
Once you’ve executed the close order, the software will look for a trader that wants to buy the position. This usually takes place in a matter of seconds. However, if there’s not a lot of activity in the market, it can take longer to execute orders.
You can also let the software close orders for you. Stop loss and take profit limits do exactly what you’d expect. You set loss and profit limits for a trade. Then, once these targets are reached, the software will automatically close your position.
Choose a Broker and Open An Account
We’ve reviewed the best EUR/AUD forex trading sites in the world. You can scroll through these reviews to find a broker that suits your needs. Each broker will offer different spreads, promotions and trading tools. That’s why we assess every feature to ensure you get the right site for you.
There are no guarantees in the trading world. You can give yourself the best chance of making a profit by doing all the necessary research and planning. However, it also pays to know the potential risks.
Investing More than You Can Afford: You should only risk a small amount of your trading funds on a single trade. As a general rule, never have more than 5% of your bankroll at risk at any one time.
Beware of Leverage: Leverage allows you to gain full market exposure. A standard forex lot is 100,000 units of currency. This is more than most people can afford. However, leverage allows you to buy this amount for a much smaller stake. That’s great, but leverage is also risky because it will magnify your losses.
Know the Market: EUR/AUD is a great forex pair to trade but that doesn’t mean profits are guaranteed. You have to do the right research and proceed cautiously. Diving in without any information is a recipe for disaster.
EUR/AUD forex trading is great when you have the right strategy. Thankfully, our resources are here to help. From our trading guides to broker reviews, we’ve got everything you need to speculate on two of the world’s biggest currencies. So, if you’re ready to trade EUR/AUD, check out our expert tips, review the live price chart and join one of our recommended brokers today.