AUD/USD traded sideways around 0.6930 on Monday as softer Australian inflation tempered demand for the currency, while mixed US services data kept the US Dollar supported without a strong bid. Australia’s TD-MI Inflation Gauge slowed to 3.9% year on year in June from 4.4%, a cooling that points to easing price pressures and may lessen the need for the Reserve Bank of Australia to retain a hawkish tilt.
In the US, S&P Global’s Composite PMI edged down to 51.9 from 52.2 and, in a related move, the Services PMI slipped to 51.2 versus 51.4 expected and 51.3 prior. The ISM Services PMI printed at 54, matching forecasts but easing from 54.5, while the Employment Index rose to 51.2 from 47.9; New Orders eased to 55.1 from 57.3 and Prices Paid fell to 67.7 from 71.3. On a four-hour view, the pair was at 0.6936, holding above the 20-period SMA at 0.6919 but below the 100-period SMA at 0.6962, with a pivot at 0.6935 and RSI near 57; resistance sits at 0.6944 then 0.6962, while support is seen at 0.6935, 0.6929 and 0.6924.
Australian Inflation Outlook and RBA Policy Expectations
The latest Australian inflation data, showing a drop to 3.9%, is a key signal for us. This softening pressure makes it less likely the Reserve Bank of Australia will need to maintain a hawkish stance. We see this as a fundamental drag on the Australian dollar for the coming weeks.
To make this view more concrete, we note this TD-MI gauge often precedes the official quarterly CPI from the Australian Bureau of Statistics. The Q1 2026 CPI reading came in at 4.1%, and this new data suggests the Q2 figure, due later this month, could easily fall below 4.0%. This reinforces the expectation that the RBA will remain on hold at its August meeting.
US Economic Data, Policy Divergence, and Trade Strategies
On the other side, the US services data shows a resilient, if slightly slowing, economy. The sharp rebound in the ISM Employment Index to 51.2 is particularly important, suggesting the labor market remains tight. After last month’s Non-Farm Payrolls report showed a solid gain of 215,000 jobs, this reduces any immediate pressure on the Federal Reserve to consider easing policy.
This growing policy divergence between a potentially pausing RBA and a patient Fed is a familiar theme. Historically, such divergence, as seen during the 2024 cycle, has consistently pressured AUD/USD lower over a multi-week horizon. We expect this pattern to re-emerge as the market prices in fewer rate hikes from Australia.
Given this outlook, we are looking to buy AUD/USD put options with expirations in late August or September. This allows us to position for downside while defining our maximum risk to the premium paid. We are targeting strike prices below the key 0.6900 psychological level.
For a more conservative strategy, we are also considering bear put spreads to lower the upfront cost. Implied volatility in AUD/USD has been subdued, recently trading around a 52-week low of 8.7%, making long-option strategies relatively inexpensive. This suggests the market is underpricing the risk of a downward move.
Technically, the pair is currently caught in a tight range, capped by resistance near 0.6962. A decisive break below the support cluster at 0.6924 would be our trigger to increase the size of our bearish positions. We will use any rallies toward the 0.6950 level as opportunities to initiate these option strategies at better prices.
