17 Proven Currency Trading Strategies [PDF]

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17 Proven Currency Trading Strategies – Book

When China announces good data, such as high GDP and high PMI numbers, the AUD tends to strengthen for two reasons.

1) China will start to import more raw materials from Australia. This increase in business gives rise to a stronger AUD because China has to pay for such materials in AUD.

2) Good data from China tend to increase speculation on higher-yielding currencies. This is because China is largely seen as a major global player, and good numbers from China tend to have a knock-on effect on the world economy. This positive effect on the global economy encourages the appetite for risk, which in turn strengthens the AUD because its interest rate remains one of the highest among the G20 nations.

We take a long position on AUD/USD immediately after China announces better-than-expected data. Similarly, we take a short position on AUD/USD immediately after China announces worse-than-expected data.

I call this strategy Siamese twins because the economies of China and Australia are joined at the hip. When China does well, the Australian economy flourishes, and vice versa.