AUD/USD traded around 0.7118 on Wednesday, up 0.43% after an intraday high of 0.7129, holding near a two-and-a-half-month peak as the US Dollar weakened. The US Dollar Index (DXY) was near 98.90, down 0.75% on the day and at its lowest since May 29, setting a softer backdrop for the pair. Australia’s employment report on Thursday is in focus, with markets looking for a 15K July jobs gain after 76.3K in June, while the Unemployment Rate is forecast to remain at 4.4%.
Technically, the pair retained a bullish bias, trading above the 21-, 50-, 100- and 200-day Simple Moving Averages (SMAs) clustered between roughly 0.6946 and 0.7065. The daily Relative Strength Index (RSI) sat near 65 and the MACD stayed slightly positive. Resistance is marked in the 0.7150-0.7200 zone; a break could target this year’s peak near 0.7270. Support levels include 0.7118, then the 100-day SMA at 0.7065 and the 21-day SMA at 0.7036, with further levels at the 50-day SMA (0.6996) and 200-day SMA (0.6946).
Derivative Strategies and Policy Divergence
With the AUD/USD pair holding firm near 0.7118 and the US Dollar Index slipping to 98.90, we see a strong opening for bullish derivative strategies in the coming weeks. Derivative traders should look at buying short-term call options or entering long futures contracts to capitalize on this upward momentum. This stance is heavily supported by the technical setup, as the pair remains comfortably above its key moving averages.
We expect the policy divergence between the Federal Reserve and the Reserve Bank of Australia (RBA) to keep pushing the Aussie dollar higher. The RBA has kept its cash rate restrictive at 4.35% to combat persistent inflation, while the US Fed has leaned toward a more accommodative stance. This interest rate differential supports our bullish view and makes the Australian dollar a prime target for buyers.
Event Risk and Tactical Recommendations
Traders must also prepare for immediate volatility ahead of the upcoming Australian employment report, which expects 15,000 added jobs and a steady 4.4% unemployment rate. To manage this event risk, we recommend using bull call spread options rather than outright long positions. This structure limits our downside risk while keeping us positioned for a potential breakout if the job numbers surprise to the upside.
If the pair breaks through the tough resistance zone between 0.7150 and 0.7200, we should target the yearly high near 0.7270. On the downside, we can set defensive stop-loss limits around the 100-day moving average at 0.7065. With the daily RSI near 65, the market shows strong but stable upward momentum without being overbought yet.
