AUD/USD traded firmer around 0.7205 in early Asian hours on Monday, with US markets shut for Labour Day. The Australian dollar found support after China’s Finance Ministry led a combined $54bn capital injection into state-owned insurers and banks to bolster balance sheets. At least eight financial institutions are seeking $53.6bn in fresh capital, and the government is set to provide more than 80% of the funding, a backdrop that tends to underpin the China-linked Aussie.
The US jobs report tempered USD weakness: Nonfarm Payrolls rose by 162,000 in August after an upwardly revised 21,000 gain in July, beating the 56,000 consensus. The unemployment rate held at 4.1%, keeping a Federal Reserve rate rise in play, while markets imply a 58.3% probability of a 25 bps move in September versus about 50.2% previously, per CME FedWatch. Technically, the pair stayed above the Bollinger mid-band and the 100-day SMA, with RSI at 66.99; resistance sits at 0.7235, while support is seen at 0.7140, 0.7080 and 0.7045.
Derivative Trading Strategies
We suggest derivative traders prepare for increased movement in the AUD/USD pair as it trades near 0.7205. With China injecting $54 billion into its financial system and US markets closed for Labor Day, we expect the Australian dollar to find immediate support. We recommend buying short-term call options targeting the 0.7235 resistance level to capture this upward momentum.
However, we must also account for the strong US jobs report, which added 162,000 jobs in August and pushed the chance of a September Fed rate hike to 58.3%. To hedge against a sudden rise in the US dollar, we should consider buying protective puts at the 0.7140 support mark. This balanced setup lets us ride the China-led bump while defending against US policy tightening.
Outlook And Technical Analysis
Looking ahead, the looming Australian economic data will test the Reserve Bank of Australia’s policy timeline in the coming weeks. Historically, September has been a highly volatile month for this pair, especially when both central banks are contemplating rate hikes at the same time. We can take advantage of this expected volatility by trading a long straddle strategy to profit from any sudden, large price swings.
From a technical view, the daily Relative Strength Index sits at 66.99, meaning the market is strong but not yet overbought. We should watch the 100-day moving average at 0.7080 as a key level to hold our bullish positions. If the pair breaks cleanly above 0.7235, we should look to roll our options higher to target 0.7300.
