Traders are anticipating the Reserve Bank of Australia’s (RBA) rate decision and the US Consumer Price Index (CPI) report, both of which are due tomorrow. Key data influencing the Australian Dollar (AUD) will include the Australian Wage Price Index and employment report.
In recent trends, the US Dollar (USD) has weakened following softer-than-expected data from the Non-Farm Payrolls (NFP) report. The market now predicts 58 basis points of easing by the year’s end, an increase from the 35 basis points forecast before the NFP.
Focus On Inflation Data
The US CPI report is in focus, with current sentiments indicating a possible rate cut in September unless inflation data suggests otherwise. On the AUD front, inflation has eased, leading to expectations of an RBA rate cut tomorrow, with markets predicting at least two more cuts by year’s end if labour market data shows further weakness.
For AUDUSD technical analysis, the daily chart shows prices in the middle of two key levels. The 4-hour chart indicates a minor upward trendline, while the 1-hour chart shows trading near the minor support zone. Sellers may aim for the 0.6485 support if the price breaks below recent support.
Upcoming events include the RBA rate decision, US CPI, Australian Wage Price Index, and employment data. Expect developments from these events to influence market sentiment and future predictions.
We are bracing for a volatile week, with the focus squarely on the US inflation report and the Reserve Bank of Australia’s rate decision tomorrow. The US dollar has been on the back foot since the July Non-Farm Payrolls report, which we now know came in at a weaker-than-expected 155k. This has significantly shifted rate cut expectations.
Expectations And Strategies
The market is now pricing in a much higher probability of a Federal Reserve rate cut by year-end, with fed funds futures implying a nearly 70% chance of a move in September. After seeing core inflation cool slightly in June 2025, another soft CPI reading tomorrow would likely seal the deal for a dovish signal from the Fed at Jackson Hole later this month. We believe it would take an unexpectedly high inflation print, perhaps above 0.4% month-over-month, to alter this course.
On the Australian side, we are positioned for a rate cut tomorrow from the RBA, a move that is already fully priced in by the markets. This comes after the latest data showed Q2 2025 inflation fell to an annualized 3.1%, continuing the disinflationary trend from the previous quarter. Therefore, the market’s reaction will depend entirely on the RBA’s forward guidance and any hints about the pace of future cuts.
For derivative traders, this setup suggests positioning for a potential spike in volatility. Buying short-dated straddles or strangles on AUDUSD, with an expiry just after this week’s data, could be a prudent way to play a significant price move in either direction. This strategy profits from a sharp swing, regardless of whether it’s the RBA or US CPI that provides the bigger surprise.
We see 1-week implied volatility for AUDUSD options has already jumped to over 14%, sitting well above the 9% average we saw through most of July 2025. This indicates the market is expecting a breakout, but it also makes buying options more expensive. Selling options might be risky now, but it could become a viable strategy if the key events pass without a major directional shift.
From a tactical standpoint, the technical levels provide clear strikes for option plays. A break below the 0.6512 support level could be a trigger for those holding put options, targeting strikes around 0.6485 or lower. Conversely, traders holding call options will want to see that support hold, using it as a launchpad to challenge higher resistance levels.
Looking beyond tomorrow, the Australian employment figures and US retail sales data later this week will be crucial for confirming any new trend. This upcoming data will influence the pricing of options with longer expiries, such as those for September and October. Sustained weakness in both economies could cement a range-bound view for the currency pair.
