AUD/USD traded 0.35% lower near 0.7150 in the European session on Tuesday, after a sharp rise on Monday. The US Dollar strengthened ahead of the 14:00 GMT confirmation hearing for Kevin Warsh as the next Federal Reserve chair.
The US Dollar Index was up 0.25% near 98.25 at the time of reporting. Warsh previously favoured a strong US Dollar and opposed Quantitative Easing in the Fed balance sheet.
Demand for the US Dollar also increased as Iran has not issued official confirmation of returning to peace talks with the US. Washington said Vice President JD Vance will travel to Pakistan to attend ceasefire talks with Tehran.
On the chart, AUD/USD stayed above the 20-day EMA at 0.7072 and remained in an uptrend from the 0.69 area. An uptrend line from the 0.6585 base, with a reference level near 0.6922, continued to support the move.
The 14-day RSI held above 60.00. Support levels were cited at 0.7072 and 0.6922, while resistance levels were 0.7222 and 0.7300.
We remember when the market anticipated a hawkish Federal Reserve, which briefly pushed the US Dollar Index toward 98.25. Today, on April 21, 2026, the situation is quite different as the Fed is now signaling a prolonged pause on interest rates. With recent data showing US core inflation has eased to 2.8%, futures markets are pricing in a 40% chance of a rate cut by the end of the year.
The Reserve Bank of Australia is in a similar holding pattern, keeping its cash rate at 4.10% amid concerns over weakening global demand. Iron ore, a key Australian export, has recently fallen below $100 per tonne for the first time in over a year, putting sustained pressure on the Aussie dollar. This contrasts with the commodity optimism we saw in previous years.
This has left the AUD/USD pair trading in a tight range around 0.6650, far from the 0.7150 levels discussed in the past. The old support around 0.6922 has now become a major resistance level that has capped all rallies since late 2025. We believe this environment of central bank uncertainty will keep implied volatility elevated.
For derivative traders, this suggests that selling options to collect premium is a viable strategy for the coming weeks. We are considering short strangle strategies, which profit if the AUD/USD pair remains between two set prices. This approach takes advantage of time decay while both central banks remain on the sidelines.
However, we must remember the dollar’s strength in the 2022-2023 period, which fundamentally altered these exchange rates. A significant surprise in the upcoming US non-farm payrolls data could easily trigger a breakout from the current range. This remains the primary risk to any range-bound derivatives strategy.
