From a trader's point of view you're just buying one currency (eg, Japanese Yen) and selling another (eg, US Dollar) with the aim being that the Yen increases
relative to the Dollar. You profit from the difference. If it goes the other way, if the Yen fell relative to the Dollar, then you would lose money. Whether the currencies go up or down when measured against any other currency is irrelevant - we are only interested in how they compare to each other.
All currency pairs can be traded in this manner although in general most traders are not interested in less common currencies. Not too many trade forex using the currency of Iraq for example. Even New Zealand isn't that common apart from those who live in NZ and perhaps a few Aussies who find it an easy country to get information about - economic data etc. That said, there is someone, somewhere, trading practically everything. The most common pair to trade is the Euro / US Dollar.
Forex is normally traded on margin. That is, you deposit, say, $5000 margin on a $100,000 position. The upside is that it magnifies your gains. The downside is that it magnifies your losses. So if your trade moves 4% in this example then you either make a $4000 profit or a $4000 loss. So, a 4% move in the currency pair gave you an 80% profit / loss on your deposit.
Needless to say, you can go broke rather quickly doing this if you get it wrong so anyone thinking of trading forex ought to design a system and prove that it works on paper first. Then start trading relatively small amounts until you KNOW that it works. It must have positive expectancy - gains exceeding losses - or you will in due course go broke no matter what size your trades are. And you need to make sure that no single run of bad trades is going to send you broke either. This is done by proper position sizing and placement of stops.
Forex brokers in general will not allow you to trade without using a stop loss. The only way around this in most cases is to deposit sufficient funds to be able to set the stop so high that it becomes irrelevant. This is due to the leveraged nature of forex trading and to ensure that it's
your money that is lost if it goes wrong, not the broker's.
I don't have a forecast for the Australian Dollar (AUD) since I don't need one for the way that I trade forex. That said, short term anything can happen in the forex markets but long term we have a Current Account deficit at about 7.2% of GDP which is VERY high compared to other developed countries. This is a negative for our currency which ought to encourage it to fall. On the other hand, demand for Australia's commodity exports counteracts this to some extent at least whilst we have ever rising commodity prices.
Also, it depends what you measure it against. The AUD could rise against, say, the USD (US Dollar) but fall against the NZD (New Zealand Dollar). That's just and example, not a forecast by the way. Likewise any other currency could rise against some currencies whilst falling against others.
It's all relative since there's no fixed point of reference unless you compare the currency value to something physical such as gold or oil. That said, many regard the Swiss Franc as a relatively stable currency against which to compare others. But in practice the US Dollar is the world's reserve currency so most others (including AUD) are usually compared to USD especially by non-forex traders. There can be no guarantee that the USD will always have this role though and many believe that the Euro will replace the USD in this role. (That's just an observation of prevailing opinions and is not a forecast).
