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Trading EUR/AUD

Written By

James Barra

Written By

James Barra

James is an investment writer with a background in financial services. As a former management consultant, he has worked on major operational transformation programmes at prominent European banks. James authors, edits and fact-checks content for a series of investing websites.

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Edited By

Jemma Grist

Edited By

Jemma Grist

Jemma is a writer, editor and fact-checker focused on retail trading and investing. Jemma brings a unique perspective to the forex, stock, and cryptocurrency markets and works across several investment websites as a researcher and broker analyst.

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Fact Checked By

William Berg

Fact Checked By

William Berg

William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.

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Updated

Sep 13, 2024

The EUR/AUD currency pair provides an opportunity for traders thanks to the size of the component economies and the isolation of the pair from the US dollar. As one of the most popular forex pairs, there is a wealth of information available to assist traders in the form of charts, historical data, and expert technical analysis.

This guide will provide a discussion of the key economic impacts on EUR/AUD exchange rates as well as live chart investing strategies. We also list the top brokers and supporting platforms.

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The Euro

The euro is the official currency of the eurozone, and has been in place since 1999, when it was used by 11 member states of the European Union (EU). Since then, a further eight members, including four outside the EU, have adopted the euro.

By May 2022, the euro was the second most traded currency, after the US dollar, being involved in 32.3% of all forex trades. The euro is controlled by the European Central Bank (ECB), which is responsible for monetary policy decisions and implementation.

By far, the biggest sector of the EU economy is services, accounting for 74.7% of GDP, followed by manufacturing at 23.8% and agriculture at just 1.5%. The strength of the euro tends to correlate directly to European economic activity, with more activity leading to a stronger currency.

The Australian Dollar

The Australian dollar is the currency not only of Australia but also the Cocos Islands, Norfolk Island, Christmas Island, Tuvalu, Kiribati, and Nauru.

The Australian dollar is the fifth most frequently traded currency in the world, involved in 6.8% of trades. The AUD has been a free-floating currency since 1983. The country’s economy is dominated by the services sector, which accounts for 66.28%. However, the agriculture and mining sectors are also important, taking a 27.47% share of GDP.

Australia is the second-largest producer and exporter of gold, resulting in a correlation between the price of gold and the strength of the AUD. Hence the Australian dollar is often referred to as a commodity currency.

EUR/AUD; A Minor Pair

The euro-Australian dollar is known as a minor cross pair. This is due to its isolation from the USD. Because of the strong global position of the currencies in the G8, it is also not an exotic pair.

Importantly, minor pairs such as the EUR/AUD cheapen the conversion from one currency to the other as there is only one swap required, rather than needing to convert to USD and then back to the other currency.

The popularity of minor pairs for forex trading comes from their isolation and the variation in the strength of the currencies. Generally, minor pairs are more volatile than major ones, and they allow traders to take advantage of big swings in conversion rates.

As for records, the EUR/AUD set an all-time high in October 2008 at 2.11 and an all-time low in August 2012 at 1.16.

EUR/AUD Influencing Factors

A bountiful resource for informing EUR/AUD investment strategies is presented by economic news. There are a range of regularly released reports, statistics, and graphs, as well as major political and economic events, that can impact conversion rates.

Inflation

Inflation affects all currencies, with a high inflation rate relative to other economies usually correlating to a weakening currency. The best way to measure the inflation of the European and Australian economies is through the published Consumer Price Indexes (CPIs).

Generally, the core CPIs are used by traders to inform predictions, as these exclude energy and food, which are much more volatile.

France and Germany account for 42.3% of the eurozone’s GDP after Brexit, making them significant players in the EUR/AUD pair. These two countries release their own CPI Flash Estimate (France) and Preliminary CPI (Germany) two weeks before the official CPIs, which can help inform investment decisions.

Note, analysis of the eurozone should take into account the interest rates of all its members.

Economic Growth

The overall outputs of the relevant economies have a major impact on the exchange rates between EUR and AUD. In simple terms, if the Australian economy performs better than the European economy, the AUD will strengthen against the EUR, and vice versa for European growth.

The GDP is often the best measure of economic strength and growth, with a high GDP indicative of a strong and healthy economy. The eurozone releases a quarterly GDP report two months after the end of each quarter. The Australian National Accounts (ANA) report details key economic flows and is also released two months after each quarter’s end.

Monetary Policies

Monetary policies implemented by the controlling bank of a currency can have a direct effect on the performance of its economy but also an indirect impact on exchange rates.

Big differences in the policies implemented by the Reserve Bank of Australia (RBA) and the European Central Bank (ECB) can change the long-term forecasts of the EUR/AUD exchange rate. This can produce volatility thanks to the opportunity it provides for speculation.

The best tools to follow for the eurozone’s policies are the press releases from the ECB regarding new updates. In particular, the language used by the ECB president in the Q&A section has the largest effect. For example, if the president seems concerned about inflation, interest rates may get raised in the future, and the euro will likely appreciate.

Politics

Political events in major economies within the EU and the world can influence the exchange rates of a large number of currencies and forex pairs, not just those directly affiliated with the affected economy. For example, the uncertainty and instability following the Brexit referendum had big impacts on the GBP and EUR. However, swings in other pairs, such as the USD/AUD, have been the result of movements directly attributed to Brexit.

One opportunity for political influence on the EUR’s strength comes from the fact that the euro area is comprised of many countries. This can sometimes cause disagreements amongst the component governments about the future of the currency, the European economy, and the best monetary policies. These arguments tend to cause a weakening in the euro, thanks to the resulting uncertainty.

Currently, the Ukrainian-Russian war is affecting the pair because of the close proximity of Ukraine to the eurozone. The EUR/AUD has also been weakened by higher oil prices, which are a result of the conflict.

Balance of Payments

The balance of payments in a country consists of three accounts: the current account, capital account, and financial account. When analyzing forex trends, the current account is the most important as it details the trade balance, income payments, and other payments between one economy and the rest.

The current account is typically either in surplus or deficit. A deficit means more money is leaving the economy than entering it, which occurs when imports exceed exports and is negative for the currency’s strength. A surplus is the opposite, with more exports and positive effects on the currency.

The eurozone releases a report on the current account status every month. France and Germany also release independent reports each month, which some investors focus on. The Australian Bureau of Statistics releases a report on its balance of payments each quarter.

Sentiment

Another approach for attempting to predict EUR/AUD price movements is with confidence and sentiment reports. Australian economic sentiment can be gauged using the Westpac Consumer Sentiment Index, which asks 1200 consumers how optimistic or pessimistic they are about the future of the Australian economy. Germany produces a widely followed sentiment report within the eurozone called the ZEW. This asks 350 financial experts what they predict for the future health of the economy, split into positive, negative, or no change.

Many analysts will have predictions for these report results. If the report exceeds expectations, the currency is likely to strengthen and likewise weaken for an underwhelming result.

For retail traders, some brokers may even provide a depiction, like the EUR AUD IG client sentiment, in order to make it easier for investors.

Trading The EUR/AUD

Optimum Window

One of the attractive features of forex investing is its availability for 24/7 trading. This being said, it isn’t always a good idea to invest in EUR/AUD regardless of the time of day. The best time to trade currencies is usually when they are most volatile and most liquid, as this brings the spreads down.

While there is no overlap between the Sydney and London sessions, historical data suggests investing and trading volumes are at a maximum during the overlap between the London and New York sessions (1300-1700 GMT). However, there are times of increased volatility and opportunity immediately after major economic releases for the European and Australian economies.

EUR/AUD Strategies

No perfect investing strategy for EUR/AUD exists, with exchange rates affected by a myriad of factors, including impossible-to-predict human factors.

There are many forex strategies online. Some entail technical EUR/AUD analysis based on pivot points and geometric patterns in live charts spanning 1 minute to 10 years.

When considering trading strategies and tools developed by other people, the best advice is to do your own due diligence. You should always verify facts and endeavor to understand the underlying factors influencing price changes.

Forex Brokers

Many of the best forex day trading platforms today offer a suite of EUR to AUD trading tools, including pip calculators and historical data such as 12 months, 5 years, 10 years, and 20 years charts.

Money converters, real-time trading ideas, the 1 EUR to AUD exchange rate history, and live graphs for plotting support and resistance levels are also available. Additionally, alongside live buy or sell quotes, some providers have futures products, next week forecasts, and longer-term predictions.

Always do your own research to find a broker that offers value in the areas you need.

Final Word On Trading EUR/AUD

The EUR/AUD, being a minor cross pair, offers volatility that traders would struggle to find with pairs involving the USD. There are vast resources available providing information on these two currencies, including major economic reports, outlook predictions, and trading strategies. While these can all help inform any investment decisions, tread lightly when using third party resources for EUR/AUD, as technical analysis that is valid today may not accurately represent a weekly forecast or be able to signal exchange rates later in 2024.

FAQs

What Is The Meaning Of EUR/AUD?

The euro is called the base currency for this forex pair while the Australian dollar is the quote currency. The quote currency tells you how much is required to buy the specified quantity (usually 1) of the base currency. If a EUR/AUD quote of 1.56 is given, this can be considered as 1.56 AUD per 1 EUR.

What Is The Best Time To Trade EUR/AUD?

There is no single best time to trade a particular forex pair, as swings can be influenced by any number of factors. However, times of high liquidity and volatility tend to offer the lowest spreads, which for EUR/AUD generally occurs between 13:00 and 17:00 GMT.

What Is A Commodity Currency?

A commodity-based currency has a large dependence on a particular resource. The Australian dollar is often called a commodity currency due to its massive export of gold and the importance of its mining sector.

How Can I Predict The Future EUR/AUD Swap Rate?

When deciding whether to sell or buy, our ‘Influencing Factors’ section details some of the most important economic indicators for projections of EUR/AUD exchange rates. Also available are historical spot rate data from trading charts and strategies that can be used for day trading.

What Is Today’s Conversion Rate For The EUR/AUD?

The FX spot rate for the pair varies each minute. See a live chart for the latest data. This can be used as a EUR-AUD dollar converter in both directions. To calculate the value of a pip, simply divide 0.0001 by the exchange rate and multiply the result by the lot size.