AUD/USD fell 0.25% and traded near 0.7060 on Wednesday, as markets waited for the FOMC minutes due later in the day and Australia’s jobs data due on Thursday. The US Dollar firmed ahead of the Federal Reserve’s January meeting account.
Markets are watching the minutes for clues on the US interest rate path, including the timing and size of possible rate cuts this year. A more cautious Federal Reserve tone can support the US Dollar and put downward pressure on the Australian Dollar.
Key Event Risks Ahead
Focus is also on Australia’s January employment report, where forecasts point to about 20,000 new jobs after a stronger December result. The unemployment rate is expected to rise to 4.2% from 4.1%.
The Westpac-Melbourne Institute Leading Index slowed sharply in January, pointing to weaker momentum in the Australian economy despite help from commodity prices. Slower growth and tighter financial conditions may add pressure to activity, while Reserve Bank of Australia policy expectations stay tied to incoming data.
We see the Aussie dollar struggling around the 0.6580 mark today, down a bit as traders are hesitant. All eyes are on the Federal Reserve’s meeting minutes due later, and just as importantly, our own local employment data tomorrow. This sets up a classic standoff between two major economic narratives.
The US dollar is finding a bid as markets dial back their aggressive rate cut expectations from late last year. January’s stubborn 2.9% CPI print from the US serves as a reminder that the inflation fight isn’t over. A cautious tone from the Fed minutes could easily push the greenback higher, putting more weight on the Aussie.
On our side, we’re bracing for the January employment report, with consensus looking for only 15,000 new jobs and the unemployment rate to tick up to 4.3%. This comes after seeing sluggish 0.3% GDP growth in the final quarter of 2025. A softening labor market would likely take any further RBA rate hikes off the table for good.
Options Strategies To Watch
Given this backdrop, we believe buying AUD/USD put options is a sensible strategy for the next few weeks. This provides downside protection if a hawkish Fed and a soft local jobs number create a sharp drop. It’s a defined-risk way to position for a move towards the 0.6400 level we saw last year.
Alternatively, for those uncertain of direction but expecting a big move, volatility is key. Implied volatility on AUD/USD options has been climbing ahead of these event risks. Structuring a long straddle could pay off if either the Fed minutes or the jobs data cause a breakout in either direction.
