Insights 
VT 
The Australian Dollar (AUD) is expected to weaken further, though an oversold condition means it may not reach the 0.6520 level today. Recent trading saw AUD rise to 0.6612, then drop to 0.6540, a level also providing support. For continued momentum, AUD should remain below 0.6595, facing minor resistance at 0.6575.
In the longer term, the AUD is projected to continue its decline towards the late-September low near 0.6520. As of 6 October, AUD was in a neutral range between 0.6555 and 0.6540, but momentum has built since then. The odds of AUD dropping below 0.6555 have increased, confirmed by a recent low of 0.6540. The upward ‘strong resistance’ is now adjusted to 0.6615 from 0.6630.
Fxstreet Insights Team
The FXStreet Insights Team comprises journalists compiling market observations from various experts. Their content features expert notes alongside internal and external insights.
The downward momentum we saw build earlier this week appears to be holding, suggesting further weakness for the AUD/USD pair. Our view from Wednesday that a break below 0.6555 was increasingly likely proved correct as the pair hit a low of 0.6540. The focus now shifts to the late-September low near 0.6520 as the next logical target in the coming weeks.
This bearish outlook is reinforced by fundamental factors beyond the charts. The Reserve Bank of Australia struck a notably cautious tone in its meeting last week, hinting that its rate-hiking cycle is firmly on pause amid concerns over global growth. In contrast, US inflation data for September, released yesterday, came in slightly hotter than expected at an annualized 3.8%, increasing the odds of another Federal Reserve rate hike before the end of the year.
Commodity Linked Currency Pressure
As a commodity-linked currency, the Aussie dollar is also feeling pressure from falling iron ore prices, which have slipped below $110 per tonne. This drop follows recent data showing a slowdown in Chinese industrial activity, a key driver for Australian exports. This divergence between a dovish RBA and a hawkish Fed creates a clear path for continued AUD weakness.
For derivative traders, this environment suggests buying AUD/USD put options is a prudent strategy. A put option with a strike price around 0.6550 and an expiry in late October or November would allow for profit from a decline toward the 0.6520 target. This approach provides downside exposure while strictly defining the maximum risk to the premium paid for the option.
A more conservative strategy would be to implement a bear put spread. This could involve buying a 0.6550 put and simultaneously selling a 0.6500 put to finance the position and reduce the initial cash outlay. This trade-off limits the potential profit but provides a higher probability of success if the pair drifts moderately lower.
We must use the strong resistance level, now at 0.6615, as our key risk marker for these bearish positions. A sustained break above this level would signal that the downward momentum has faded. It would require us to unwind any short positions and re-evaluate the bearish outlook.
