AUD/USD edged down on Wednesday, trading near 0.6900 and lower by 0.31% on the day, as the US Dollar found fresh demand in a cautious market tone. The Australian Dollar stayed soft after China’s RatingDog Manufacturing PMI printed at 51.7 in June, in line with forecasts and slightly below May’s 51.8, while earlier official PMI readings pointed to manufacturing still constrained by weak domestic demand.
Support for the Greenback came from firmer US Treasury yields and a risk-off backdrop alongside robust labour data. JOLTS job openings rose to 7.594M in May, the highest in two years, and the Challenger Job Cuts report showed layoffs fell to 45,849 in June from 97,006 previously, reinforcing expectations of a more hawkish Federal Reserve stance. Geopolitical uncertainty around US–Iran talks added to safe-haven demand. In Australia, markets see only a limited chance of further RBA tightening this year, even as minutes said policy needs to remain restrictive. Focus now shifts to US ADP Employment Change and ISM Manufacturing PMI ahead of Thursday’s NFP.
Policy Divergence and Bearish AUD/USD Outlook
Given the divergence between a hawkish Federal Reserve and a more cautious Reserve Bank of Australia, we see continued pressure on the AUD/USD pair. The strong US labor market data reinforces the dollar’s strength, making it prudent to position for further downside. We would consider buying put options with strike prices around 0.6850 and 0.6800 to capitalize on this expected move.
The latest CME FedWatch Tool is showing a greater than 70% probability of the Fed holding rates steady through the third quarter of 2026, while Australian bond futures are pricing in a potential RBA rate cut by year-end. This growing policy divergence underpins our bearish outlook on the pair for the coming weeks. Therefore, selling out-of-the-money call spreads above the 0.7000 psychological resistance level offers a way to collect premium while defining our risk.
Trading Strategies Ahead of US Nonfarm Payrolls
The upcoming US Nonfarm Payrolls report this Thursday is a significant event that will inject volatility into the market. Historically, AUD/USD has seen its average daily price movement increase by over 40% on NFP release days compared to the monthly average. To trade this expected spike in movement, we are looking at purchasing short-dated straddles that expire next week to profit from a large price swing in either direction.
With geopolitical uncertainty providing a floor for the US dollar, we expect any rallies in AUD/USD to be limited. Implied volatility for AUD/USD options has risen to a 30-day high of 11.5% ahead of the jobs data, making premium-selling strategies attractive. Selling an iron condor with a range between 0.6800 and 0.7050 could be effective if the NFP data fails to produce a sustained breakout.
