AUD/USD hovered around 0.7100 on Thursday, near multi-week highs after a steady recovery, though it was marginally softer as the US Dollar regained some ground. Australian employment data pointed to a faster-cooling labour market, while inflation expectations moved higher, leaving the macro signals mixed. The Reserve Bank of Australia kept the cash rate at 4.35% at its August meeting and reiterated it could raise rates if upside inflation risks build, a stance that continues to provide a tailwind for the currency.
Attention turns to Friday’s US flash PMI releases after prior readings remained in expansion. Technically, the pair traded at 0.7115 on the four-hour chart, holding above the 20-period SMA at 0.7104 and the 100-period SMA at 0.7053, with horizontal support at 0.7103. RSI sat around 58. Resistance levels were marked at 0.7120, then 0.7124 and 0.7132, while initial support was seen at 0.7104 and 0.7103, with 0.7053 below as a deeper backstop.
Trading Strategies and Technical Outlook
We recommend derivative traders focus on buying short-term call options or setting long structures while AUD/USD holds above the key 0.7103 support level. With the 100-period Simple Moving Average sitting lower at 0.7053, any dips toward this zone represent high-probability entry points for bullish reversal plays. This constructive stance is backed by the Relative Strength Index at 58, which shows the market still has plenty of room to run before becoming overbought.
Fundamental Dynamics and Volatility Drivers
We must weigh this technical strength against Australia’s mixed economic signals, where the unemployment rate recently nudged up to 4.2% while inflation expectations jumped. Although a cooling labor market usually triggers rate cuts, the Reserve Bank of Australia’s decision to hold its cash rate at 4.35% keeps a hawkish floor under the Aussie dollar. For options traders, this fundamental tug-of-war suggests using bull call spreads to limit premium decay while capturing potential upside toward the 0.7132 resistance ceiling.
Ahead of Friday’s US flash Purchasing Managers’ Index (PMI) data, where markets expect a steady expansion print around 51.0, we should prepare for heightened volatility. Historically, strong US economic data has temporarily boosted the greenback, creating sharp, short-lived pullbacks in this currency pair. To exploit these quick swings, traders can utilize near-the-money straddles or wait to buy the dips if the pair drops toward the 20-period SMA at 0.7104.
