AUD/USD has extended its pullback after slipping below the May trough around 0.7070. The pair has since retested the 200-DMA in the 0.6870/0.6830 area, a zone that aligns with the March lows, and it also provided support during the November 2025 correction.
The 0.6870/0.6830 band remains the immediate support area, with scope for a short-term rebound if it holds. On the topside, the recent lower high around 0.7070/0.7090 is the nearest resistance and may cap any recovery attempts.
Technical And Fundamental Set-Up
We are watching the AUD/USD as it tests a critical support zone between 0.6870 and 0.6830. This level is significant because it represents the 200-day moving average and has served as a floor for the currency pair in both March 2026 and November 2025. How the pair reacts here in the coming days will likely dictate its direction for the rest of the month.
The downward pressure is being reinforced by fundamental factors, as iron ore prices, a key Australian export, have softened by 8% over the past month. Concurrently, recent US non-farm payroll data came in stronger than expected at 215,000, reducing the likelihood of an imminent Federal Reserve rate cut and strengthening the US dollar. This economic divergence is making it difficult for the Aussie to find a footing.
Potential Trading Strategies
If we believe this support will hold, selling put spreads with strikes below 0.6830 for late July or early August expiration looks attractive. This strategy allows us to collect premium with the view that the pair will not break down further in the short term. A bounce from this level would make this a profitable trade without requiring a massive rally.
Conversely, any rebound is likely to face a firm ceiling near the 0.7070/0.7090 zone, which was the previous support level in May. We would view a rally to this area as an opportunity to sell call spreads, betting that the upside is capped. Implied volatility has increased, suggesting the market is anticipating a decisive move, which makes selling options premium a viable strategy.
A clean break and daily close below 0.6830 would signal a failure of this key support and likely trigger a new wave of selling. In such a scenario, we would close any bullish positions and instead look to buy put options. The next significant historical support level does not appear until the 0.6650 area, suggesting a sharp move lower is possible if the current floor gives way.
