AUD/USD gave back earlier gains on Wednesday, down 0.34% to about 0.6960 and slipping back under 0.7000 after stronger US inflation data lifted the US Dollar. The US CPI rose to 3.7% year-on-year in September from 3.4% in August, while core CPI increased to 2.6% from 2.4%. On the month, headline inflation rose 0.6% and core grew 0.3%, prompting a repricing of Federal Reserve expectations: the implied probability of a 25-basis-point rise in October moved to 47% from 22%, and the chance of a December increase rose to 41% from 18%.
US Treasury yields climbed, with the 10-year near 5.33% versus around 5.20% before the release, while the US Dollar Index was up 0.46% at roughly 102.70, its highest since April 2025. Attention then shifts to Australia’s September employment report on Thursday for implications for the Reserve Bank of Australia. In technical terms, AUD/USD traded around 0.6964, below the 100-period SMA at 0.6974 and the 200-period SMA at 0.6968, with the 14-period RSI at 33. Resistance levels were cited at 0.6968, 0.6974, 0.6995, 0.7005, 0.7045, 0.7075, 0.7105 and 0.7140, while support was flagged at 0.6932, 0.6904 and 0.6883.
Derivative Strategy Recommendations
We recommend derivative traders align their strategy with the renewed strength in the US Dollar following the surprise acceleration in September annual inflation to 3.7%. With futures markets quickly repricing the probability of an October Federal Reserve rate hike to 47%, buying US Dollar call options or establishing short positions on vulnerable currency pairs offers strong potential over the coming weeks. Historically, when 10-year US Treasury yields break sharply higher toward 5.33%, dollar-denominated assets tend to sustain upward momentum across derivative markets for several weeks.
Technical Outlook and Risk Management for AUD/USD
For the AUD/USD pair specifically, we should look to establish short positions or bear put spreads on rallies back toward the 0.6975 resistance area, where short-term moving averages now cap the price. Targeting downside support levels at 0.6932 and 0.6904 provides a clear profit objective as long as the pair remains capped beneath the 0.7000 psychological threshold. Utilizing defined-risk option strategies helps capture this downward continuation while protecting capital against sudden market shifts.
However, because the hourly relative strength index sits near 33, we should avoid chasing short positions directly at current levels around 0.6960 to minimize exposure to a short-term bounce. We must also account for the upcoming Australian employment figures, which could spark sudden volatility if the data surprises to the upside. Using tight stop-loss orders above 0.7005 or purchasing cheap call options as hedges will help manage risk ahead of upcoming policy updates from the Reserve Bank of Australia.
