Insights 
VT 
On the daily chart, AUDUSD continues its rally since the dovish turn by Powell, targeting the top trendline. In the 4-hour timeframe, bullish momentum is defined by an upward trendline, with buyers and sellers positioned around new highs and lows.
The 1 Hour Chart
The 1-hour chart indicates a pause in the rally as the market awaits US inflation data. Key levels to watch include 0.6580 for potential pullbacks and 0.6620 for further upside. Upcoming data releases include the US PPI, CPI, Jobless Claims, and University of Michigan Consumer Sentiment reports.
We are seeing continued weakness in the US dollar as the market digests this morning’s soft August 2025 inflation data, which showed the core Consumer Price Index (CPI) easing to 2.8% year-over-year. This cements our view that the Federal Reserve will cut interest rates at its meeting next week, with fed funds futures now pricing in an 85% probability of a 25 basis point reduction. The path of least resistance for the dollar appears to be downwards heading into that decision.
For derivative traders, this environment favors strategies that profit from a continued rise in the AUDUSD pair. Buying call options with a strike price near 0.6650 allows us to capture further upside momentum toward the upper trendline mentioned in the technical analysis. This approach clearly defines our maximum risk while offering significant potential reward if the US dollar weakness persists.
The Australian Dollars Stability
However, we should be cautious, as dovish sentiment on the Fed may be overextended, similar to the situation we saw in late 2023 when rate cut expectations were priced out aggressively, causing a dollar rally. A prudent hedge would be to purchase put options with a strike price just below the key upward trendline, around 0.6550. This protects against any unexpected strength in upcoming US economic reports, like Friday’s consumer sentiment data.
The Australian dollar’s stability provides a solid foundation for the pair’s upward trend, with their own inflation holding around 3.2%, which is higher than in the US. The Reserve Bank of Australia is therefore expected to hold rates steady, creating a policy divergence that favors a stronger Aussie against the greenback. This fundamental difference is the main force we see driving this trade in the coming weeks.
