The Australian Dollar is holding steady above 0.6500 after a recent turnaround. The softer US Dollar and moderate risk appetite help support the currency, but upward movement seems limited. With no major economic news expected, the market remains stable. There is optimism about better US-China economic relations due to talks of a meeting between their leaders at the APEC summit.

Technical Analysis Shows Mixed Signals

Technical analysis indicates mixed signals, showing weak momentum and a hesitant market. The AUD/USD pair is just above 0.6500, with possible drops to 0.6450 and 0.6375. Resistance is found around 0.6545 and 0.6590. Key factors impacting the AUD include interest rates from the Reserve Bank of Australia (RBA) and the price of Iron Ore, a significant export. Additionally, the state of the Chinese economy, Australia’s biggest trading partner, is crucial. The RBA’s interest rate decisions significantly influence the AUD. The Trade Balance, which shows the difference between export income and import costs, also plays a role. A positive Trade Balance strengthens the currency, while a negative one weakens it. Current stability above 0.6500 presents an opportunity for range-bound strategies. Given the mixed signals, traders might consider selling call options near the 0.6590 resistance level. This strategy takes advantage of anticipated limited upward movement.

Current Market Dynamics and Future Predictions

The recent decision by the central bank to raise interest rates to 4.35% is likely already factored into the market. Futures markets indicate an over 80% chance that rates will stay steady in December. As a result, we don’t expect any immediate upward momentum from domestic monetary policy. Australia’s trade balance supports the currency, with a September surplus of A$12.24 billion, exceeding expectations. However, concerns about China linger, as the recent manufacturing PMI fell to 49.5, indicating slight contraction. This mixed data suggests a tug-of-war that may keep the currency stable. Iron ore prices have surged recently to over $130 per tonne, a multi-month high driven by stimulus hopes in China. This strength in commodities is likely to prevent sharp declines to the 0.6450 support level. A softer US Dollar also plays a significant role. A recent US inflation report showed the annual rate slowing to 3.2%, reinforcing expectations that the Federal Reserve will not raise rates further. This change reduces a major downward force that has affected the AUD/USD pair for months. Taking these factors into account, we recommend strategies that benefit from low volatility. A short strangle—selling both an out-of-the-money put and call option—could be effective. This strategy works best if the currency pair stays within its key support and resistance levels in the coming weeks. Create your live VT Markets account and start trading now.

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