AUD/USD rose about 0.3% on Wednesday, rebounding from 0.6900 before slipping back under 0.6950. It is recovering from a two-month low near 0.6830 and remains below March highs around 0.7120. Australia’s February building permits rose 29.7% MoM versus a 6.5% consensus. The RBA lifted the OCR to 4.10% in March, and markets price about a 65% chance of a further rise in May; a trade balance of 2,500M is expected on Thursday. US data showed ADP jobs at 62K against a 40K forecast and retail sales up 0.6% MoM. ISM Manufacturing Prices Paid climbed to 78.3 from 70.5, the highest since 2022, while the ISM PMI rose to 52.7; the Fed stance remains a hold at 3.50% to 3.75%. President Trump is due to address the nation on Wednesday night on the war with Iran. Markets are monitoring any change after comments that US forces could leave within two to three weeks. On the 4-hour chart, AUD/USD is at 0.6929 and holds above support near 0.6875, with resistance at 0.6954. The 200-period EMA is near 0.6990, Stochastic RSI is above 80, and support levels include 0.6900, 0.6875, and 0.6850. Looking back at the analysis from around this time in 2025, we saw a market trying to balance a hawkish Reserve Bank of Australia against surprisingly strong inflation data from the U.S. The Australian dollar was attempting a recovery from 0.6830 but struggled to gain traction above 0.6950. That period was defined by uncertainty over which central bank would remain more aggressive. The situation has evolved significantly over the past year. In 2025, markets were pricing a 65% chance the RBA would hike its 4.10% cash rate further, which it eventually did, peaking at 4.35%. Now, the conversation has shifted entirely, with the futures market pricing in a 70% probability of at least one rate cut by the end of 2026 as Australian inflation has cooled to 3.4%. Similarly, the extreme inflationary pressure we saw in the U.S. back in early 2025 has subsided. That shocking ISM Manufacturing Prices Paid figure of 78.3 proved to be a peak, with the most recent March 2026 reading coming in at a much more moderate 55.8. This has allowed the Federal Reserve to begin slowly normalizing policy, a stark contrast to the firm hold at 3.50% to 3.75% we were observing last year. The geopolitical risks that were a focus of President Trump’s 2025 address regarding Iran have also eased, reducing the safe-haven demand for the U.S. dollar. With both central banks now signaling a dovish tilt, the AUD/USD has settled into a new range, well below the levels seen last year. The pair’s failure to break above the 200-period moving average near 0.6990 in 2025 marked a significant top before the subsequent decline. Given this environment of converging central bank policy and lower overall market volatility, we should consider strategies that profit from range-bound price action. Selling out-of-the-money strangles on AUD/USD seems appropriate, allowing us to collect premium as long as the pair avoids any major breakout. This strategy is based on the view that neither the RBA nor the Fed is likely to surprise markets with a hawkish turn in the coming weeks. We can establish the strikes for these short option positions around key technical levels, such as selling calls with a strike near 0.6750 and puts with a strike near 0.6450. The primary risk to this position would be an unexpected inflation report from either country. Therefore, we must pay close attention to the upcoming quarterly CPI data from Australia and the monthly releases from the United States.

Start trading now – Click here to create your real VT Markets account