AUD/USD opened on Monday with a bearish gap to about 0.7115, then rebounded and moved back above the mid-0.7100s in Asia. It has paused after pulling back from Friday’s peak near 0.7220, the highest level since June 2022.
The US dollar started the week firmer amid renewed US-Iran tensions around the Strait of Hormuz, which weighed on AUD/USD early on. Reduced expectations of a US Federal Reserve rate rise limited further US dollar gains, while the Reserve Bank of Australia’s hawkish outlook supported the Australian dollar.
Technically, the pair has risen strongly from the 100-day simple moving average and broke above the 0.7115 resistance last week. Buying interest around 0.7115, now seen as support, points to a continued upward bias.
Momentum signals lean positive, with MACD above its signal line and RSI near 62, which does not indicate overbought conditions. A move above 0.7200 could open the way to a retest of 0.7220–0.7225.
Support is first seen near 0.7115, with further support around 0.7100. The 100-day SMA is near 0.6900.
Looking back at the bullish technical setup from early 2025, we remember the strong momentum that carried the AUD/USD past the 0.7115 level. The positive signals from indicators like the MACD and RSI were valid at the time, supporting a continued push. That analysis correctly identified the near-term path of least resistance as being to the upside.
However, that rally toward 0.7225 proved to be a peak as the fundamental outlook shifted later that year. The Reserve Bank of Australia paused its hiking cycle sooner than anticipated, while the US Federal Reserve maintained a restrictive stance longer than the market priced in. This divergence in central bank policy eventually unwound the Aussie’s strength through the second half of 2025.
Today, on April 20, 2026, the situation is completely different, with the pair trading near 0.6550. We now see Australian inflation down to 3.1%, with markets pricing in a 75% chance of an RBA rate cut by August. In contrast, US inflation is holding firmer at 2.8%, making the Fed cautious about easing policy too soon.
For derivative traders, this environment suggests positioning for either further downside or range-bound activity. One-month implied volatility for AUD/USD is currently at a relatively low 8.5%, making it cheaper to buy options than it was a year ago. This presents an opportunity to structure trades with a favorable risk-reward profile.
Given the dovish RBA sentiment, traders anticipating a break lower could consider buying put options targeting the 0.6400 level. Alternatively, constructing bear put spreads would reduce the upfront cost while still profiting from a modest decline. This strategy defines the risk should a surprise geopolitical event or a shift in Fed language cause a dollar downturn.
For those who believe the major central bank moves are already priced in, the low volatility makes selling options attractive. A short strangle, selling both an out-of-the-money call and put, could be a viable strategy to collect premium. This would be profitable if we expect the AUD/USD to consolidate in its current 0.6500-0.6650 range ahead of the next major economic data releases.
