AUD/USD traded around 0.7020 in early European dealing on Tuesday as easing Middle East tensions supported risk appetite. US President Donald Trump said talks with Iran were under way and described them as Tehran’s “last chance” to end a five-month conflict, while Iranian officials denied direct discussions and said they were speaking to Oman about the Strait of Hormuz. Focus turns to Australia’s Trade Balance on Thursday and the US July jobs report on Friday, which could shape expectations for the Fed’s next move and the path of US rates.
Domestic policy remains a tailwind as the RBA retains a hawkish stance; markets are fully pricing one additional hike this year, taking the OCR to 4.60%. Rabobank data showed AUD net shorts rising for a sixth straight week to the highest since September 2025, yet the currency is up 4.9% against the USD year-to-date after three RBA hikes. Technically, AUD/USD is capped by the 100-day SMA at 0.7052, with resistance also near 0.7040; support sits around 0.6980 and 0.6925, while the 14-day RSI stands at 55.5.
Trading Strategies Amid Geopolitical and Domestic Developments
We advise derivative traders to closely monitor the AUD/USD pair as it hovers around 0.7020, driven by shifting geopolitical headlines. If US-Iran talks show real progress, we could see a quick break above the immediate resistance level of 0.7040. However, since Iranian officials have denied these talks, we must hedge against sudden risk-off moves that could drag the pair back down.
The Reserve Bank of Australia’s hawkish stance remains a strong backstop, with markets currently pricing in a rate hike to 4.60% later this year. With global iron ore prices steady around $105 per tonne supporting the nation’s trade balance, we see solid structural demand for the Aussie. We recommend buying call options on dips toward the Bollinger middle band near 0.6980 to capture this yield advantage.
Key Data Releases and Options Positioning
This Friday’s US July payrolls report, which economists expect to show a gain of around 165,000 jobs, will be the next major catalyst for the US dollar. A stronger-than-expected result will bolster higher-for-longer rate bets in the US, capping AUD/USD below its 100-day simple moving average of 0.7052. We suggest utilizing straddles or strangles to profit from the sharp volatility this release is likely to trigger.
Despite recent gains, net speculative shorts on the Australian Dollar are at their highest levels since September 2025. This heavy short positioning means any positive economic surprise could spark a rapid short squeeze. Given the forecasted sideways trading between 0.6900 and 0.7050 over the coming weeks, we favor range-bound strategies like iron condors to collect premium.
