AUD/USD traded flat but held above the mid-0.7000s and around 0.7050, staying close to Friday’s high and its strongest level since 16 June, as markets waited for the Reserve Bank of Australia’s policy decision on Tuesday. The central bank has delivered three rate increases since the start of the year, and the pair remained in consolidation ahead of the meeting, with attention also on the latest US inflation figures later in the week.
Chinese data released over the weekend showed annual consumer inflation slowed to a six-month low, while producer price inflation eased more than expected in July, adding pressure to the Australian Dollar alongside renewed US Dollar demand. The initial response to Friday’s weak US Nonfarm Payrolls report faded as geopolitical risks persisted, including tensions linked to the Middle East, the reopening of the Strait of Hormuz and fresh Houthi attacks on Saudi energy infrastructure, which supported the USD. Oil prices found some backing from the US-Iran standoff, keeping inflation concerns alive and leaving expectations for at least one Fed rate hike in 2026 in focus; technically, AUD/USD held above the 100-day SMA at 0.7053, tested resistance near the 50.0% Fibonacci level at 0.7066, with further levels at 0.7114, 0.7182 and 0.7269, while support sat at 0.7053, 0.7019, 0.6959 and 0.6864.
Derivative Trading Strategies Ahead Of The RBA Decision
As we approach the Reserve Bank of Australia meeting tomorrow, August 11, 2026, we advise derivative traders to prepare for heightened volatility. The AUD/USD is currently hovering just above its 100-day Simple Moving Average at 0.7053, making a sharp breakout highly likely. Buying short-dated straddles today can help us profit from a large move in either direction, regardless of whether the central bank decides to hike or pause.
Implications Of Chinese Data And Geopolitical Tensions
We must also consider the cooling economic data from China, where consumer inflation recently slowed to just 0.3%, signaling weaker demand for Australian commodity exports. This economic slowdown acts as a major headwind for the Australian Dollar, limiting its upward momentum. To protect against a downward turn, we recommend buying out-of-the-money put options with a target strike price near the 0.7019 support level.
Meanwhile, ongoing geopolitical tensions in the Middle East and threats near the Strait of Hormuz keep Brent crude oil prices elevated around $80 per barrel. This risk premium continues to fuel global inflation fears, supporting the safe-haven US Dollar and keeping US Federal Reserve rate hikes on the table. Holding long USD call options is a prudent way for us to hedge against any sudden spikes in global risk aversion.
Technically, a break above the immediate resistance level of 0.7066 could open the door for a quick run toward the 61.8% Fibonacci level at 0.7114. Conversely, if the central bank takes a dovish tone, we expect a swift drop toward the 0.6959 support floor. Utilizing knock-out barrier options will allow us to participate in these sharp moves while keeping our maximum risk strictly capped.
