AUD/USD gave up earlier gains after meeting selling pressure above 0.7100. It fell 0.23% to near 0.7065 in late Asian trade on Monday, as the Australian Dollar weakened.
The US Dollar rose against the Australian Dollar but lagged other major currencies amid fresh US trade policy uncertainty. The US Dollar Index (DXY) was 0.3% lower around 97.50.
Trade Policy Uncertainty
The US Supreme Court ruled that President Donald Trump exceeded his authority under the International Emergency Economic Powers Act (IEEPA) when supporting wide-ranging tariffs. The ruling also invalidated extra import duties, and Trump then announced 15% global tariffs.
Technically, AUD/USD has traded between 0.7045 and 0.7100 for more than a week. The 20-day EMA is rising at 0.7015, while the 14-day RSI remains in the 40.00–60.00 band.
If momentum improves, the pair could move towards the 12 February high of 0.7147. A weaker RSI could point to consolidation and reduced near-term drive.
The US Dollar is the world’s most traded currency, making up over 88% of global FX turnover, or about $6.6 trillion a day in 2022. The Federal Reserve targets inflation at 2% and uses rates, QE and QT to influence the Dollar.
Looking Back At Last Year
Looking back at the events of last year, we saw how sudden trade policy announcements created significant volatility in the AUD/USD pair. That period in 2025, where the pair struggled around the 0.7100 mark, set the stage for a shift in market dynamics. The key takeaway was how global trade uncertainty can weaken the risk-sensitive Australian Dollar more than the US Dollar, even when the US initiates the policy shock.
As of today, February 23, 2026, the fundamental picture has become much clearer, and it is driven by central bank policy divergence. Recent US inflation data showed core CPI remaining persistent at 3.1%, keeping the Federal Reserve from signaling any rate cuts. In contrast, Australia’s latest quarterly inflation report showed a continued cooldown to 2.8%, increasing speculation that the Reserve Bank of Australia may be forced to cut rates by the third quarter.
This policy gap puts downward pressure on the AUD/USD, which is currently trading near 0.6650. The interest rate differential, which favors holding US Dollars, is a powerful headwind for the Aussie. Adding to this, prices for iron ore, Australia’s key export, have softened by 8% since December 2025 amid concerns over global industrial demand.
For derivative traders, this suggests a bearish outlook for AUD/USD in the coming weeks. Buying put options with a strike price around 0.6500 could be a straightforward way to position for a further decline while capping potential losses. This strategy allows traders to profit from a move lower without the unlimited risk of shorting the spot currency directly.
Given that implied volatility in currency markets has been moderate, with the CVOL index for major pairs hovering around 8.5, option premiums are not excessively expensive. Alternatively, for those expecting the pair to stagnate or drift lower, a bear call spread could be considered. This involves selling a call option just above the current resistance level and buying a further out-of-the-money call to limit risk, allowing a trader to collect a premium if the pair stays below the strike price.
