AUD/USD slipped on Thursday as US Dollar demand outweighed support from stronger-than-expected Australian jobs figures, with the pair trading near 0.6966 and down 0.45% on the day. The Greenback firmed as the Middle East war boosted safe-haven flows, while higher Oil prices fed inflation concerns and reinforced expectations the Federal Reserve could still tighten policy. CME FedWatch pricing implies an 83% probability of a September rate rise, and the US Dollar Index (DXY) was around 101.45, a three-week high.
Technically, the pair remained above the 21-day and 200-day Simple Moving Averages (SMAs) at 0.6948 and 0.6896, though it stayed below the 50-day SMA at 0.7028. The Relative Strength Index (RSI) sat near 47, just under the 50 neutral mark, while the Moving Average Convergence Divergence (MACD) was marginally positive, alongside a weakening green histogram. Resistance levels were cited at 0.7028, then 0.7100 and 0.7250, with support at 0.6948 and 0.6896; a break lower would open 0.6800.
Derivative Trade Strategies For AUD/USD Downside
We advise derivative traders to prepare for a downward move in the AUD/USD pair over the coming weeks as geopolitical risks continue to favor the greenback. Since the US Dollar Index recently rallied to a three-week high of 101.45, we should focus on protecting long assets by purchasing AUD/USD put options. Our primary downside target for these short-term trades should be the immediate support level at 0.6948.
Market Dynamics, Historical Patterns, and Technical Levels
Historical data shows that when energy supply fears push global oil prices up by over 10%, the Australian Dollar routinely underperforms safe-haven currencies despite strong domestic jobs data. Today, with oil-driven inflation fears rising, interest rate markets are pricing in a strong 83% chance of a Federal Reserve rate hike in September. Because of this, we believe selling call options above the 50-day moving average of 0.7028 offers a high-probability income-generating strategy.
From a technical perspective, the Aussie’s momentum is drying up as the Relative Strength Index sits below the neutral line at 47. If the pair drops below its 200-day moving average at 0.6896, we expect a quick decline toward the 0.6800 mark. We recommend using bear put spreads to capture this potential downside while keeping trade costs low.
