Australian Dollar Futures Strategy (Backtest)
Last Updated on April 18, 2023
Established in February 1966 and denoted as A$, AU$, or more commonly, AUD, the Australian dollar is the official currency of Australia and its external territories, such as Christmas Island and Norfolk Island. It is issued and regulated by the Reserve Bank of Australia (RBA). The Australian dollar is about the fifth most-traded currency in the foreign exchange market, which is why it is quite popular among currency futures traders.
The Australian dollar futures strategy is a futures contract whose underlying asset is the Australian dollar. It is an agreement to receive or deliver the specified amount of Australian dollars on a future date, at an already agreed exchange rate. The contract is priced in USD and settled by delivery of AUD. The Australian dollar futures strategy refers to the methodologies and techniques for trading this futures contract.
In this post, we answer some questions about the Australian dollar futures strategy, and we also provide you with a strategy backtest.
What are Australian dollar futures?
The Australian dollar futures is a futures contract whose underlying asset is the Australian dollar. It is an agreement to receive or deliver the specified amount of Australian dollars on a future date, at an already agreed exchange rate.
The contract is priced in USD and settled by delivery of AUD. It allows you to trade the value of the Australian dollar against the US dollar in a liquid, transparent, and standardized market.
What is an Australian Dollar futures strategy?
The Australian dollar futures strategy refers to the methodologies and techniques for trading this futures contract profitably. This includes the strategies you can use for market timing, leverage and position sizing, risk management, and other trade management techniques.
If you want to trade futures with any success, you must have a robust trading strategy with precise entry and exit signals and risk management methods.
Australian dollar futures strategy backtest
A backtest with strict trading rules, settings, statistics, and historical performance is coming soon.
What is the seasonality of Australian Dollar futures?
Seasonality in financial markets refers to the tendency of a security’s price to move in a fairly predictable way during certain periods of the year. Generally, the periods we refer to are the various months of the year.
Historically, the Australian dollar tends to perform better against the USD during the months of April, May, October, November, December, and January. It performs poorly during the months of February, March, and July, as you can see in the chart below:
What moves the Australian dollar — What affects the Australian dollar the most?
The key factors that move the Australian dollar include monetary policy reports, such as interest rates and policy statements; inflation reports, such as the consumer price index and the producers’ price index; commodity prices (especially metals and grains); growth reports, such as the GDP, manufacturing PMI, services PMI, and retail sales; the Australian government’s credit rating; and major events in the major Asian markets. Important political events, such as elections, also affects the currency.
How are Australian dollar futures traded?
The Australian dollar futures contracts trade on the CME Group’s futures exchange. Through the exchange’s Globex platform, the contract can be traded from any part of the world from Sundays to Fridays from 5:00 p.m. to 4:00 p.m. CT the next day, with a one-hour break each day. Both AUD/USD and AUD/JPY contracts also trade on the Eurex exchange.
How do you start trading Australian dollar futures?
To start trading AUD futures, you have to register with a futures broker who can offer you access to the exchange’s platform and clearinghouse, and then fund your account.
You can also trade the CFD of futures contracts via an online CFD broker, such as IG. CFDs enable you to trade price fluctuations in the futures market without having to worry about the asset’s delivery issues involved in direct futures trading. IG offers CFDs on futures.
What is the Australian dollar trading at?
The AUD futures were trading at $0.6713 as of November 23rd, 2022.
Note that the price changes in real time. To get the real-time price on the CME platform or directly from TradingView, click on any of the links.
What’s the Australian dollar futures hour?
On the CME Globex electronic platform, the Australian futures trades from Sundays to Fridays from 5:00 p.m. to 4:00 p.m. CT the next day. There is a one-hour break before the start of the next trading day.
On the Eurex platform, the contract trades between 7:30 am and 10:00 pm CET (Central European Time), which is GMT+1.
Where can I find trading charts?
You can find the trading chart on any trading platform you are using if the platform offers chart services. If your platform does offer charts, you can use TradingView, which offers free access to charts of different instruments. However, to connect to your broker, you have to subscribe to the Pro services. You can also access the TradingView chart via the CME platform. Alternatively, you can subscribe to a third-party charting platform, such as MultiCharts.
What are the trading symbols for Australian dollar futures?
On the CME Globex platform, there are two AUD contract types: the full contract and the micro contract. The full contract’s trading symbol is 6AZ2, while the micro contract’s symbol is M6AZ2. The product code on CME ClearPort is AD. On the Eurex platform, the symbol for AUD/USD and AUD/JPY contracts are RSAU and RSAY respectively.
What is the specification for the Australian dollar futures contract?
For the full contract size, one contract of AUD futures is equivalent to 100,000 Australian dollars, while for the micro contract, the contract size is 10,000 Australian dollars. The price quotation is in U.S. dollars and cents per AUD increment.
There are quarterly contracts (Mar, Jun, Sep, Dec) listed for 20 consecutive quarters and serial contracts listed for 3 months, and settlement is by physical delivery.
Why should you start trading Australian dollar futures?
As traders, the main reason we trade futures is to profit from price fluctuations. Some traders also buy and sell the AUD contract on different platforms at the same time in order to profit from price imbalances across platforms — a method known as arbitrage trading.
However, for business people with international transactions, the most common reason for trading Australian dollar futures is to hedge foreign exchange risks associated.
What is the contract size?
For the full or standard contract size of the Australian dollar futures, one contract is equivalent to 100,000 Australian dollars. To get the USD value of the contract, you multiply it by the AUD/USD exchange rate. So, the USD value of one full contract of the Australian dollar future would be 100,000 x 0.6713 = $67,130
For the micro contract, the contract size is 10,000 Australian dollars. So, the USD value would be 10,000 x 0.6713 = $6,713.
What is the tick size?
For one full contract of the Australian dollar futures, the tick size is $10 per tick per contract on CME ClearPort and $5 on the Globex platform. For the micro contract size, the tick size is $1.00.
What is the minimum price fluctuation for Australian dollar futures?
On the Globex platform, the minimum fluctuation is 0.00005 per AUD increment (equivalent to $5.00 per contract tick size). The consecutive months spread is $0.00001 per AUD or $1.00 per contract, while all other spread combinations use 0.00002 per AUD or $2.00 per contract.
On CME ClearPort, the minimum fluctuation is 0.0001 per AUD, which is equivalent to $10 per full contract size.
Are there any ETFs?
Yes, the Australian dollar ETF that trades on the US stock exchange is Invesco CurrencyShares Australian Dollar Trust (FXA). This fund offers exposure to the Australian dollar relative to the US dollar, increasing in value when the AUD strengthens and decreasing in value when the USD appreciates. You can use the ETF to hedge AUD exchange rate exposure or bet against the US dollar.
What factors affect Australian dollar prices?
Some of the factors that affect the Australian dollar include interest rate changes, inflation reports, commodity prices (especially metals and grains), and reports about the balance of payments, such as current account and trade balance reports. Growth reports, such as the GDP, manufacturing PMI, services PMI, and retail sales, as well as the Australian government’s credit rating and political events also affect the currency.
What is the all-time high for Australian dollar futures?
Historically, the all-time high for the AUD/USD is $1.4885, which was reached in December 1973. But the TradingView Chart for AUD futures stopped in the year 2000, and the highest AUD futures price since then is $1.10050, which it achieved in July 2011.
What are the biggest risks in trading Australian dollar futures?
The biggest risk when trading AUD futures is adverse price movement. Given that it is a leveraged instrument, the losses are calculated using the actual value of the contract size traded. As a result, if you trade with a 20x leverage, a 1% negative movement results in a 20% loss in your account.
What is the settlement method?
What is the settlement procedure?
The settlement procedure involves the physical delivery of AUD at contract expiration. But normal daily settlements happen until Rollover Date — CME Group staff determines the daily settlement of AUD/USD futures (6A) at 14:00 Central Time (CT) based on trading activity on CME Globex.
What is the block minimum for Australian dollar futures?
What is the difference between Australian dollar futures and Forex for the Australian currency?
The spot forex value for the Australian dollar is determined in relation to the spot value of the USD, whereas the AUD futures is priced independently. Also, AUD futures contracts are standardized and have fixed expiration dates, while the spot forex AUD/USD pair can be traded indefinitely.
Which forex pair is the same as Australian dollar futures
The forex pair that matches the Australian dollar futures trading on the CME platform is the AUD/USD currency pair. On the Eurex platform, there are also AUD/JPY futures contracts, so the AUD/JPY currency pair is also correct.
What are some important dates for this market?
- February 14, 1966, when the Australian dollar replaced the Australian pound
- December 1983, when the government floated the Australian dollar
- October 15, 2010, the AUD gained parity with the USD for the first time since it was floated
What is the highest AUD has ever been — its all-time high?
According to the TradingView chart for AUD/USD forex pair, the highest the Australian dollar has ever reached is $1.4885 in December 1973.
What is the lowest AUD has ever been — its all-time low?
According to the TradingView chart for AUD/USD forex pair, the lowest-ever value of the AUD against the USD is $0.47760 in April 2001.