AUD/USD firmed to around 0.6970 on Monday, up 0.34%, even as the US Dollar stayed underpinned by high Treasury yields and a softer Euro. US service-sector readings remained expansionary but uneven: the ISM Services PMI slipped to 54.9 in September from 55.4 and came in below the 55 consensus, while the Prices Paid Index rose to 74 from 72.6. The Employment Index edged up to 50.1 from 47.8, and New Orders eased to 59.8 from 60.9; by contrast, the final S&P Global Services PMI was revised to 58.8 from 58.7.
The Dollar’s strength persisted, with the US Dollar Index above 102.50 and at an 18-month high, helped by the Euro’s 57.6% weighting and renewed focus on French public finances. The French–German 10-year spread hovered around 150 basis points, the widest since 2011, while the US 10-year yield held near 5.30 after touching 5.34, a level last seen in 2002. On the one-hour chart, AUD/USD traded at 0.6968 above the 100-period SMA at 0.6953 and support at 0.6955, with the 200-period SMA at 0.6988 acting as a cap; RSI (14) sat near 60. Resistance is flagged at 0.6980, 0.6988, 0.7005, 0.7045, the 0.7075–0.7105 zone and 0.7140, while support levels include 0.6955, 0.6953, 0.6907 and 0.6883.
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US Dollar Strength and Macro Forces
We are currently seeing the US Dollar trade at its highest levels in 18 months, driven by sticky services inflation and US 10-year Treasury yields holding near 5.30%. Even though the Australian Dollar has clawed back some ground to trade near 0.6970 today, this heavy macroeconomic pressure from the US suggests that upward moves will face strong headwinds. Derivative traders should prepare for heightened volatility in the coming weeks as the market balances this stubborn US economic resilience against global growth concerns.
We must also closely watch the widening European bond spreads, specifically the French-German 10-year yield gap which has blown out to 150 basis points. Historically, such wide spreads—which we last saw during the Eurozone debt crisis in 2011—severely drag down the Euro, which makes up over 57% of the US Dollar Index. For derivative traders, utilizing option spreads on the major currency pairs or trading volatility indexes could be highly effective as European fiscal worries keep the greenback bid.
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AUD/USD Chart Levels and Trading Strategies
Looking at the AUD/USD chart, we see a tight battleground where the currency pair is wedged between immediate support at 0.6953 and resistance around the 200-period moving average at 0.6988. Because the Relative Strength Index is sitting around 60, momentum is constructive but far from overbought. Derivative traders can exploit this near-term range by utilizing neutral option strategies like iron condors, or by placing breakout orders just above the 0.7005 resistance level to capture any sudden upward momentum.
Conversely, if the US 10-year yield continues its march toward its historical 2002 peak of 5.34%, the risk of a sharp downward trend increases. A clean break below the support floor at 0.6953 would likely trigger a swift slide toward the 0.6907 and 0.6883 levels, invalidating the current bullish bias. We recommend implementing tight stop-loss orders on long positions or purchasing defensive put options to guard against a sudden bearish reversal.
