The AUDUSD pair is rising as the US dollar weakens due to comments from Fed’s Kashkari suggesting a possible rate cut in September. This was prompted by weaker-than-expected US job data. Before the non-farm payroll report, the market anticipated a stronger outcome, leading to a rate cut projection of 60 basis points by year-end, up from 35 basis points. Fed Chair Powell may consider a cut if soft economic data continues.
Meanwhile, the ISM Services PMI indicated a new high, and upcoming US jobless claims figures could alter perceptions of labour market strength. Weak figures could further pressure the dollar. Australia’s inflation report eased, suggesting the Reserve Bank of Australia may proceed with expected rate cuts.
Technical Analysis
On the technical side, the AUDUSD has been climbing since the weak NFP data. On the daily chart, it’s trading between key levels, with detailed analysis from shorter time frames. The 4-hour chart shows a break above minor support, extending the rally with bullish momentum. A pullback might see buyers lean on the rising trendline for continued gains. Meanwhile, sellers await a break lower to target support. The 1-hour chart shows the price near the upper daily range, suggesting potential pullbacks in line with risk management strategies.
Based on the current environment, the weakening US dollar is the dominant theme for us to follow. Last Friday’s Non-Farm Payrolls report on August 1st, 2025, came in softer than expected at around 170,000, which has dramatically shifted Fed expectations. The market, as seen through tools like the CME FedWatch, is now pricing in a greater than 70% chance of a rate cut in September.
However, we must watch for conflicting signals that could introduce volatility. For instance, today’s jobless claims data showed a resilient labor market, coming in at 215,000, which was below the forecast. This kind of data, coupled with high price indexes in recent service sector reports, creates uncertainty and could temper the dollar’s decline.
This conflict between dovish Fed commentary and pockets of economic strength suggests that implied volatility in AUD/USD options may be undervalued. If the market is too complacent about a straightforward dollar decline, any surprise could cause volatility to spike. We should consider strategies that benefit from a rise in volatility.
Trading Strategies
For traders expecting the upward trend to continue, the technical picture points towards the 0.6600 level. A straightforward way to play this would be buying AUD/USD call options with an expiration in late September to capture the potential momentum from the Jackson Hole Symposium and the Fed meeting. This provides a defined-risk way to profit if the rally extends as anticipated.
On the other hand, we must prepare for a potential reversal if the dollar finds a floor. The technical analysis highlights the trendline and the 0.6485 level as key areas to watch. A break below this support could see a rapid move back towards the 0.6350 zone, making protective put options a prudent hedge for any long positions.
Looking back, we saw a similar pattern in 2019 when the Fed pivoted from a hiking cycle to an easing one, which led to a period of dollar weakness. That historical precedent supports the view that the path of least resistance for the greenback is lower for now. This suggests that selling dollar strength, rather than buying dollar dips, is the higher probability trade.
On the Australian side, the recent quarterly inflation report showing a fall to 3.8% gives the Reserve Bank of Australia a clear reason to cut rates. This could cap the AUD/USD rally, especially as we approach the 0.6600 resistance. Selling out-of-the-money call spreads could be an effective strategy to generate income if we believe the pair will struggle to break much higher from there.
