AUD/USD hovered near 0.7070, retaining only a small portion of Wednesday’s advance after printing an intraday peak near 0.7090. US CPI largely met expectations: headline prices rose 0.1% month on month and 3.4% year on year, while the core annual rate eased to 2.5% versus a 2.6% consensus. The release weighed on the US Dollar and reduced the immediate push for tighter policy, with attention turning to Thursday’s US PPI, where core producer prices are expected to slow sharply on an annual basis.
Market pricing for a September Fed move was described as sitting just under 50%, and a 0.18% m/m preliminary PCE forecast was flagged as sensitive to the PPI print. On the four-hour chart, the pair traded at 0.7067, holding above the 20-period SMA at 0.7062 and the 100-period SMA at 0.7016, with horizontal support at 0.7060 and RSI around 57. Resistance is seen at 0.7069, then 0.7071 and 0.7078, while a deeper pullback would refocus attention on 0.7016.
Derivative Trading Opportunities in AUD/USD
With the U.S. headline inflation sitting at 3.4% and the core rate easing to 2.5%, we see a clear window of opportunity for derivative traders to play the range in AUD/USD. The currency pair is currently testing key resistance near 0.7070, but tomorrow’s Producer Price Index (PPI) release will likely decide if it can break higher. Historically, when core annual PPI slows sharply, it triggers immediate downward pressure on the Greenback, making short-term call options on the Aussie dollar highly attractive.
We recommend that traders look at the tight technical boundaries, specifically using the 20-period SMA of 0.7062 as a crucial pivot point for spot and futures positions. If the pair maintains its ground above the 0.7060 horizontal support, we anticipate a steady push toward the next overhead targets at 0.7071 and 0.7078. Derivative strategies like bull calls or tight stop-loss buy orders just above 0.7062 would allow us to capture this momentum without taking on excess risk.
Macro Backdrop and Monetary Policy Considerations
Looking at broader monetary policy, the Federal Reserve’s current target rate of 5.25%-5.50% contrasts with the Reserve Bank of Australia’s cash rate of 4.35%, keeping interest rate differentials in sharp focus. Since the market is still pricing in nearly a 50% chance of a Fed rate hike in September, any softer-than-expected PPI data this week will rapidly deflate those expectations. We believe this macro backdrop favors buying AUD/USD dips, using the solid 100-period SMA support at 0.7016 as a broader safety net for long-term options.
