AUD\/USD slipped in Asian trading on Thursday after rising more than 0.5% the prior session, hovering around 0.7120 as the Australian dollar weakened following a soft labour report. Australia\u2019s unemployment rate ticked up to 4.5% in July versus forecasts of 4.4%, while employment fell by 15.8K after June\u2019s 80.2K gain and against expectations for a 15.0K increase. Market pricing implied just 12 bps of RBA hikes over a three-month view. Broader pressure also stems from weaker Chinese demand for Australian commodities and a softer domestic backdrop.<\/p>\n
The downside was tempered by a softer US dollar as Fed expectations eased. The Fed\u2019s July minutes showed officials would consider raising rates if inflation failed to cool, after holding the policy rate at 3.5%\u20133.75%; inflation remains above the 2% target, though monthly readings suggest more modest pressures. CME FedWatch pricing puts the probability of a hike at the next meeting at 32.7%, down from 47% a month earlier. On charts, AUD\/USD traded near 0.7110, above the nine-period EMA at 0.7087 and the 50-day EMA at 0.7034, with 14-day RSI at 63.2; resistance sits at 0.7200, while the FXS Fed Sentiment Index remains below earlier peaks.<\/p>\n
We suggest that derivative traders look for buying opportunities on minor pullbacks as the AUD\/USD pair maintains a constructive bullish structure despite recent weak Australian jobs data. Buying call options or setting long limit orders near the nine-period Exponential Moving Average of 0.7087 allows us to capitalize on the broader upward trend. Historically, when this currency pair holds above its 50-day moving average, short-term dips are quickly bought up by institutional players looking for value.<\/p>\n
Because both the Australian Dollar and the US Dollar face domestic headwinds, we anticipate a period of consolidation below the 0.7200 psychological ceiling. Traders can take advantage of this environment by deploying short strangle or iron condor strategies to collect option premium. This range-bound view is supported by recent foreign exchange volatility metrics, which show AUD\/USD implied volatility steadying around its historical baseline of 8.5% during late August trading.<\/p>\n
We must closely watch the shifting Federal Reserve rate hike odds, which have recently dropped to just 32.7% according to the CME FedWatch Tool. Any further signs of cooling US inflation will likely weaken the greenback and propel the AUD\/USD pair toward our near-term target of 0.7200. To manage downside risks from weak Chinese commodity demand, we recommend placing protective stop-losses or buying defensive puts just under the technical floor at 0.7034.<\/p>\n\n\n\n