Fundamental Drivers Behind AUD/USD Movement
We’re seeing AUD/USD recover towards 0.7040 after its dip below the 0.7000 mark. This is mostly due to a softer US dollar, with the DXY pulling back from its early June highs above 105.5 to around 105.1. This weakness comes from renewed optimism surrounding US-Iran diplomatic talks, which is reducing the dollar’s safe-haven appeal for now. We also see support for the Aussie dollar from the Reserve Bank of Australia’s recent hawkish tone. With the latest quarterly CPI data showing inflation is still at 3.8%, well above the RBA’s target, the market is pricing in the possibility of further rate hikes. This fundamental pressure provides a floor for the currency. However, we believe any significant rallies will be capped due to expectations for the US Federal Reserve. The latest US jobs report came in stronger than expected, reinforcing the Fed’s case to keep rates higher for longer. In fact, the CME FedWatch Tool is now showing over a 65% chance of a rate hike by December, which should limit US dollar downside.Technical Outlook and Trading Strategies
From a technical standpoint, we see this week’s failure to hold above the 100-day moving average near 0.7085 as a bearish signal. We would consider selling call spreads with a short strike above that 0.7085 level to take advantage of capped upside. This strategy allows us to profit if the pair stays below that resistance or moves lower, while defining our risk. The key support to watch is the 0.7000 psychological level. If we see a decisive break below this, we would look to buy put options or establish short positions targeting the next support zone around 0.6928. Historically, breaks of major round numbers like 0.7000 can accelerate selling pressure.Start trading now — click here to create your real VT Markets account.
