AUD/USD fell about 0.5% on Monday and ended near 0.7170, after reaching an intraday low of 0.7150. This followed Friday’s four-year high above 0.7225, with price moving below 0.7200.
The Reserve Bank of Australia announces its rate decision on Tuesday. Futures imply about a 60% chance of a 25 basis point rise to 4.35% from 4.10%.
Rba Policy And Inflation Backdrop
Australia’s March headline CPI rose to 4.6%, above the RBA’s 2% to 3% target band. The trimmed mean CPI was 3.3%, and the March meeting vote was 5-4 in favour of a rise.
In the US, Friday’s Non-Farm Payrolls is expected at 60K jobs versus 178K previously, with unemployment seen at 4.3%. Tuesday brings ISM Services PMI and JOLTS, followed by ADP private payrolls on Wednesday.
On the 15-minute chart, AUD/USD was 0.7168 and below the daily open at 0.7211, with Stochastic RSI near 45. On the daily chart, price was above the 50-day EMA at 0.7061 and the 200-day EMA at 0.6816, with Stochastic RSI near 54.
Looking back to this time in May 2025, we remember the Aussie dollar trading near a four-year high above 0.7200. The Reserve Bank of Australia was actively hiking rates to combat inflation that was running hot at 4.6%. The market environment felt distinctly bullish for the AUD/USD pair, even with some short-term selling pressure.
Fast forward to today, the situation has evolved significantly. While the RBA’s cash rate has been holding at 4.35% for several months, the latest Q1 2026 inflation data came in at a sticky 3.6%, keeping rate cut discussions off the table for now. This contrasts with the US, where the Federal Reserve is signaling a cautious path towards easing later this year.
Options Positioning In A Range Bound Market
The US labor market, which we expected to add only 60,000 jobs in May 2025, has proven more resilient over the past year. The most recent Non-Farm Payrolls report for April 2026 showed a solid 175,000 jobs were added, with unemployment at a low 3.9%. This continued strength in the US provides underlying support for the US dollar, creating a headwind for the Aussie.
Given that AUD/USD is now trading around 0.6650, far below the 0.7060 support level from last year, we see a range-bound market. Selling out-of-the-money call options with strike prices near 0.6800 could be a prudent way to collect premium, as significant upside seems capped by the policy differences. Implied volatility for one-month options is hovering near 8.5%, offering a reasonable return for taking on this defined risk.
Alternatively, for those concerned about a sudden downturn, buying put options can provide a hedge against a break below the year-to-date lows. A drop could be triggered if upcoming US data forces the Fed to delay its easing plans further, strengthening the dollar. A put spread could be an effective, lower-cost strategy to protect against such a move while we wait for clearer direction from either central bank.
