AUD/USD fell 0.36% on the session yet stayed above 0.7000 as the US dollar strengthened broadly. The US Dollar Index rose 0.28% to about 100.00, reversing Wednesday’s advance in the Aussie. The move came even as crude rallied, with oil up more than 3% at $77.67 after reports that vessels linked to the US, Israel and other states Tehran deems hostile could be barred from the Strait of Hormuz under a proposed deal. With around a fifth of global oil flows implicated, the development was framed as a growth risk rather than a tailwind for a commodity-linked currency.
Attention also turned to Chinese trade data, where exports were expected to rise 22.2% year-on-year in July versus 27% previously, while imports were seen increasing 27.9% compared with 36%. The trade surplus was forecast to narrow to $107 billion from $125.62 billion. In the US, Friday’s Nonfarm Payrolls report was flagged as a potential catalyst for further dollar gains. Technically, AUD/USD was at 0.7031, with the 100-period SMA at 0.7001 as support and the 20-period SMA at 0.7035 as resistance; RSI sat around 50, with resistance at 0.7033–0.7034 then 0.7044 and 0.7049, and support at 0.7023 and 0.7001.
Derivative Trading Strategies Amid Dollar Strength
We advise derivative traders to position for a potential breakdown below the key 0.7000 support level on AUD/USD in the coming weeks. While the currency has held above the 100-period Simple Moving Average at 0.7001, a strengthening US Dollar Index near the 100.00 level puts heavy pressure on the downside. Buying short-dated put options with a strike price just below 0.7000 could offer an attractive risk-reward profile as the market tests this structural floor.
Although crude oil has surged to $77.67 due to shipping threats in the Strait of Hormuz, this spike acts as a tax on global growth rather than a boost for commodity exports. Historically, the Australian Dollar suffers when global shipping risks rise, as it is highly sensitive to international trade health. We recommend using bear put spreads to exploit this breakdown in the typical correlation between rising oil prices and the Aussie dollar.
Macro Risks: Chinese Slowdown and Payrolls Volatility
Furthermore, Chinese export growth is slowing to 22.2%, pointing to weaker industrial demand from Australia’s largest trading partner. With the Reserve Bank of Australia keeping its cash rate steady at 4.1% amidst this regional slowdown, currency upside remains heavily capped. We suggest selling out-of-the-money call options above the 0.7035 resistance level to capture steady premium in this consolidating environment.
Finally, today’s US Nonfarm Payrolls release is the ultimate wildcard that could propel the greenback well above the 100.00 psychological level. A strong employment print will solidify the US Dollar’s dominance, leaving the Aussie squeezed between weak Chinese demand and high US yields. We advise traders to establish long volatility positions, such as straddles, to profit from the sharp breakout expected after today’s data release.
