AUD/USD slipped towards 0.7160 on Tuesday, while keeping a broadly firm tone as the US Dollar strengthened in a risk-off setting. US data remained mixed, limiting the pace of further US Dollar gains.
Earlier releases pointed to solid consumer activity and strong labour conditions. The 4-week average of the ADP Employment Change rose to 54.8K from 39K, but this did not fully support continued US Dollar momentum.
Talks aimed at easing US–Iran tensions remained unclear, with conflicting reports on whether discussions would take place. A second round of talks is expected in Islamabad, while Iranian state-linked outlets said no official delegation had travelled for negotiations.
With a temporary ceasefire close to expiring, market caution remained in place. Donald Trump said an extension was unlikely and stated the Strait of Hormuz would stay closed unless a formal agreement is reached.
On the four-hour chart, AUD/USD traded at 0.7161, sitting above the 100-period SMA at 0.7028 but below the 20-period SMA at 0.7167. Resistance levels were 0.7167, 0.7173 and 0.7185, while support was at 0.7152 and 0.7028; RSI (14) eased towards the mid-50s.
The current market environment is showing signs of risk aversion, much like the period described when US-Iran tensions were high. Today, this sentiment is being driven by uncertainty over the Federal Reserve’s next move and renewed trade friction in the South China Sea. This leaves the US Dollar in a strong position against risk-sensitive currencies like the Australian Dollar.
The Australian Dollar is particularly vulnerable to this global mood, especially with recent data showing a slowdown. China’s official Manufacturing PMI for March 2026 came in at 49.9, signaling a slight contraction and weighing on the outlook for Australian commodity exports. We believe this makes short positions on the AUD an attractive hedge against further risk-off sentiment in the coming weeks.
Meanwhile, the US Dollar is receiving mixed signals, creating a complex trading picture similar to what we saw back in 2025. While the latest Non-Farm Payrolls report for March 2026 was solid, adding 230,000 jobs, the most recent weekly jobless claims have ticked up to 225,000, their highest in three months. This conflict in the data suggests the Dollar’s rally may not have the momentum to break significant new highs without a fresh catalyst.
Given this backdrop of uncertainty, we believe traders should consider strategies that benefit from a potential increase in price swings. Using options to construct straddles or strangles on the AUD/USD could be effective, as they profit from a significant price move in either direction. Implied volatility in AUD/USD options has already risen by 8% over the past two weeks, indicating the market is preparing for turbulence.
Looking back, we recall that similar periods of mixed US data in the mid-2020s often led to choppy, range-bound trading before a clear trend emerged. Therefore, traders should use key technical levels not just for entry and exit points, but for positioning the strike prices of their options. This allows one to capitalize on the eventual breakout while being shielded from minor fluctuations.
