EUR/AUD Trading Guide: How to Trade Euro to Australian Dollar

According to a Triennial Central Bank Survey published in 2022 by the Bank for International Settlements (BIS), the Euro is ranked second among the world's most-traded currencies in terms of trading volume, and trails behind only the US dollar, while the Australian dollar ranks at the 6th position.
The relationship and trade dynamics between these reputable economies (Europe and Australia) have led to one of the most traded currency pairings in the foreign exchange market.

Main Points:

• The EUR/AUD is the abbreviation used to denote the value of the Euro relative to the Australian dollar.
• The EUR/AUD is regarded as a minor pair in the forex market, however, it is notable for its rapid price movements that often exceed the volatility of major currency pairs.
• By trading EUR/AUD CFDs, traders can gain exposure to the price movements of the EUR/AUD exchange rate without ownership of either currency.
• Traders can calculate the resulting net profit or loss in an EURAUD trade by multiplying the contract size by the number of pips moved.

Understanding the Euro - Australian Dollar Currency Pair

The EURAUD currency pair is the exchange rate representing the Euro to the Australian dollar. As of 2024, EURAUD is the 12th most traded currency pair in the world and accounts for 1.8% of total FX turnover.

The relationship between Europe and Australia depicted in this pairing extends beyond trade and reflects trends in global economics and the commodity markets.

Although regarded as a minor currency pair because it does not constitute the US dollar, EURAUD's volatile price movements provide an avenue for currency traders and speculators seeking opportunities beyond the major USD pairs.

What Is the Euro?

• Within the Eurozone, the Euro serves as the designated official currency.
• It is designated as “€” and abbreviated as “EUR” in the foreign exchange market.
• The European Central Bank (ECB) and the consortium of central banks from eurozone countries, collaborate to manage and govern the Euro.
• The currency ranks second in both reserve currency holdings and global trading volume.

What Is the Australian Dollar?

• Australia's official currency, the Australian dollar, is utilised across its mainland and external territories, as well as by three independent sovereign Pacific Island nations: Kiribati, Nauru, and Tuvalu.
• It is designated as “$AU” or “AU$” and denoted as “AUD”.
• It is managed and administered by the Reserve Bank of Australia (RBA).
• The significance of AUD in global finance is a result of Australia's major role in commodity exports.

History of the EUR/AUD (Euro and Australian Dollar)

The concept of the EUR/AUD currency pair in foreign exchange transactions is fairly recent due to the Euro (EUR) being a more recent currency compared to the Australian Dollar.

History of the Euro

The Euro was established by the 1992 Maastricht Treaty for member states in Europe. In December 1995, during a summit in Madrid, the term "euro" was formally chosen to represent Europe's unified currency. This move paved the way for the euro's introduction into the global financial markets replacing the former European Currency Unit (ECU) on January 1, 1999.

The Euro's introduction in 1999 was not with immediate dominance. From December 1999 to December 2002, it consistently traded at a lower value than the US dollar. This trend has changed dramatically in recent years, with the Euro now trading close to or even exceeding the value of the US dollar.

History of the Australian Dollar

The inception of the Australian dollar traces back to 1966, when Australia embarked on a significant monetary reform, transitioning away from the Australian pound to the Australian Dollar. This marked a turning point in Australia's economic and financial relationships particularly with the United States.

Later in 1983, the Australian dollar's exchange rate system was changed from its fixed rate to a floating exchange rate. This allowed the value of AUD to fluctuate based on various economic factors like supply and demand in the global financial markets.

What Is EUR/AUD Trading?

EUR/AUD is the ticker symbol that represents the exchange rate of the Euro (EUR) to the Australian Dollar (AUD). In this exchange rate, the Euro is the base currency and the Australian dollar (AUD) is the quote currency. This indicates that, at every point in time, the EURAUD value reflects the quantity of Australian dollars needed to purchase one Euro. Therefore, as both currency values fluctuate, the EUR/AUD exchange rate will change relative to the strengths and weaknesses of both currencies. This presents opportunities for traders to speculate on the price movement of the EUR/AUD pair. If you believe the Euro (EUR) will appreciate relative to the Australian Dollar (AUD), you can take a long position on EUR/AUD. Conversely, a short position suggests you expect the EUR to depreciate relative to the AUD. Hence, it is important to understand what influences the fluctuations in its price movement.

What Are the Driving Factors Influencing the EUR/AUD Price Movement?

The fluctuations in the EURAUD exchange rate are influenced by a variety of factors relative to both the European and Australian economies. The major driving factors are as follows:

Central Bank Policies

Decisions by central banks, namely the European Central Bank (ECB) and the Reserve Bank of Australia (RBA) regarding interest rates, quantitative easing, and other monetary policies play a crucial role in influencing the trajectory of the EUR/AUD exchange rate. Therefore, traders must closely monitor the ECB and RBA monthly meetings and reports as indicators of possible future policies.

Hawkish statements or policy measures by the European Central Bank (ECB), such as interest rate hikes or tapering of stimulus programs, can lead to EUR appreciation against the AUD. In contrast, dovish statements or policy measures by the ECB can lead to the depreciation of the EURAUD. The same applies to the Reserve Bank of Australia (RBA). The RBA's hawkish policies can lead to the Aussie appreciation against the Euro and vice versa.

Difference in Yield

Investors seek yield in currencies with higher interest rates. Therefore, interest rate disparities between the Eurozone and Australia are a critical factor because the inflow of investors' capital into an economy can appreciate the currency value in the foreign exchange market. The Australian government debt is known for its low interest rate. Therefore, If the ECB raises interest rates, the Euro may become more attractive to investors seeking higher yields. This can lead to an appreciation of the EUR/AUD exchange rate.

Commodity Prices

The Australian dollar's price has had a long period of stability, mostly due to Australia's well-established role as a major exporter of commodities like wheat, iron ore, and gold. Rising demand and commodity prices can boost Australia’s trade balance and strengthen the Aussie against the Euro, causing the EUR/AUD pair to depreciate. On the other hand, a decline in demand for Australian commodities may weaken the Australian dollar relative to the Euro.

Inflation

To measure the inflation of economies, it is common practise for traders, analysts and investors to monitor the published Consumer Price Indexes (CPIs). France does release the CPI Flash Estimate and Germany releases the Preliminary CPI two weeks before the official CPIs every month. However, there are variations of CPI, such as core CPI, which excludes volatile items like food and energy to provide a clearer picture of underlying inflation trends.

Geopolitics and Uncertainties

Geopolitical events and global uncertainties can induce risk-on or risk-off sentiment in either the Euro or the Australian dollar. In addition, political events in major economies within the EU and the world can significantly impact the exchange rate of the Euro to the Australian dollar. For example, the uncertainty following the Brexit referendum and the Ukrainian-Russian war have significantly affected the eurozone and consequently the Euro exchange rate to the Australian dollar.

Economic Data Releases

Economic data, such as higher Gross Domestic Product (GDP) growth, lower unemployment rates, and robust manufacturing output, can boost confidence in a particular currency. Hence, positive data from the Eurozone can lead to EUR appreciation against the Australian dollar and vice versa.

How to Trade the EUR/AUD Forex Pair

With Forex CFDs, traders can speculate on the price movements of currency pairs price movements without directly owning the currencies involved. The agreement is between the trader and CFD provider. It focuses solely on the difference in value between the trade's opening and closing price.

Trading EUR/AUD through Contracts for Difference (CFDs) allows traders to speculate on the exchange rate's fluctuations of EUR/AUD cross without owning either of both currencies. Through the strategic placement of long or short positions on EUR/AUD CFDs, traders can potentially profit or lose from the price difference between the entry and exit points of the CFD trade.

Calculating Profits and Losses in EUR/AUD Trading

To calculate the profit or loss in an EURAUD trade; simply multiply the contract size by the amount of pip move to find your net gain or loss. Importantly, the resulting profit or loss will be in terms of the quote currency.

For example:
Let's assume you open a EUR/AUD trade with a standard contract position of 100,000 units, and its price currently trades at 1.6142. If the price moves from 1.6142 to 1.6157, it is a 15-pip increase. Therefore, the 15-pip move for a standard contract position of 100,000 units will result in AU$150 (100,000 x 0.0015).

To determine the outcome as a profit or loss, we will consider examples of long and short positions.

Example of EURAUD CFD Long Position:

In the scenario of a long position, EURAUD price increase will result in profit, while a decrease will result in a loss. Using our earlier example, if the position is long EUR/AUD, and the price increased by 15-pip, the profit realised will be AU$150. Conversely, if the prices decreased from 1.6142 to 1.6122, hence decreased by 20-pips, it would result in a loss of AU$200 (100,000 x -0.0020).

Example of EURAUD CFD Short Position:

In a short position, a price increase leads to a loss, while a decrease will result in profit. If we held a short EUR/AUD position in the same example and the prices increased by 15 pips, it would result in a AU$150 loss (100,000 x -0.0015). However, a 20 pips decline in price movement would result in a profit of AU$200 (100,000 x -0.0020).

To convert the profit and loss into EUR; divide the profit or loss by the EUR/AUD rate, i.e., AUD 200 ÷ 1.6122, which will be €124.0577.

What Are the Trading Hours for EUR/AUD CFDs?

The forex market operates Monday to Friday except on weekends. Furthermore, traders can track EURAUD price movement in real-time and trade the EURAUD CFDs directly from the Plus500 App or WebTrader platform. EURAUD trading is available continuously, starting Sunday at 10:00 PM CET to Friday at 10:00 PM CET.

*Please note that trading platform hours depend on the individual operator.

Guidelines for Trading EUR/AUD CFDs

Practise With the Broker’s Platform

The Plus500 user-friendly app and webtrader platform is home to a vast number of technical indicators, including advanced charting features, and various order types. Taking the time to get acquainted with the advanced tools of the platform can be very rewarding. These efforts can significantly improve your proficiency in using the platform and executing trades effectively.

Fundamental Analysis

Staying up-to-date with commodity prices relevant to Australia’s exports and fundamental factors like political developments and economic data reports from both the European Union and Australia can help to anticipate future trends in the EURAUD price rate.

Technical Analysis

It is important to also pay close attention to the historical price movement of the EURAUD pair. By conducting technical analysis on recent data with advanced charts and technical indicators, traders can identify trends and anticipate potential trading opportunities.

Risk Management Practises

Given the risk of the pair's volatility, risk management becomes a crucial aspect of trading EURAUD, especially when using leverage. Traders should clearly outline their risk tolerance for EUR/AUD trading by defining the percentage of the account balance they are willing to risk on each position.

Sentiment Analysis

Evaluating sentiment data is crucial when trading the EURAUD pair. Plus500 trading platform provides sentiment data that shows its clients’ bullish and bearish sentiment on the EURAUD pair.

Traders may also consider financial analysts' reports on the future of the Australian economy and the Eurozone by viewing the Westpac Consumer Sentiment Index and the German sentiment report (ZEW) for the Eurozone.

Risk and Advantage of Trading EURAUD

Trading the EUR/AUD currency pair presents both risks and advantages.

The Risks of EURAUD Trading:

1. Heightened Volatility: EUR/AUD is known for its volatility which is characterised by quick price swings. This volatility requires traders to employ strict risk management plans.


2. Overlapping Economic Events: Economic releases from both the Eurozone and Australia can occur simultaneously leading to increased uncertainty for traders.


3. Currency Risk: Traders are exposed to currency risk influenced by global factors, market sentiment, and geopolitical events. This adds complexity to trading and can lead to unexpected losses.


4. Central Bank Interventions: The possibility of central bank interventions can introduce additional uncertainty into the market, impacting the direction of the currency pair.

The Advantages of EURAUD Trading

Diversification Opportunities: Trading EUR/AUD provides diversification benefits for traders looking to expand their portfolio beyond major currency pairs that feature the US dollar.

Conclusion

The EUR/AUD currency pair presents an opportunity for traders seeking to get exposure to price movements within the foreign exchange market, particularly those not involving the US dollar.

Due to the major role of the Euro and the Australian dollar in global finance, they rank among the most traded currencies in the forex market. In addition, the EURAUD currency pair, despite its classification as a minor, is characterised by significant volatility, liquidity and tight spread.

The significance of the EUR/AUD pair is rooted in the economic influence of the Eurozone and Australia. The Eurozone's robust economic presence, coupled with Australia's prominence in commodity exports, contributes to the fluctuations in the EUR/AUD exchange rate, presenting potential trading opportunities for traders.

Frequently Asked Questions (FAQs)

What Is the Exchange Rate For the EUR/AUD Pair Today?

The EURAUD exchange rate fluctuates constantly except on weekends. You can log in to the plus500 app to see the current rate of EURAUD.

How Many Countries Officially Use the Euro?

The Euro serves as the official currency for 20 out of the 27 member states of the European Union.

What Is the Best Time to Trade the EURAUD?

To ensure favourable trading conditions in the EUR/AUD currency pair, historical data suggests that the most advantageous trading window occurs during the overlap between the London and New York sessions, typically from 13:00 to 17:00 GMT. This timeframe coincides with significant market announcements and heightened trading activity.