The AUD/USD has reached its highest point in eight months at 0.6604, thanks to a generally weaker USD during morning trading in Asia. The Australian Dollar is performing well, alongside other currencies like the EUR, NZD, and GBP, which have also gained this morning. Recent data shows that Australia’s preliminary manufacturing PMI for July 2025 rose to 51.6 from the previous 50.6. This increase signals growth in the manufacturing sector and supports the rise of the AUD.

Risk Management In Forex Trading

Forex trading carries a high level of risk and can lead to significant losses. Leverage can increase risks and exposures, making it essential to carefully assess your investment goals, experience, and risk tolerance. Only invest what you can afford to lose, and seek guidance from qualified professionals about the risks involved in forex trading. The information on investingLive is for informational purposes only and should not be taken as investment advice. It is provided “as-is” and may not be complete or accurate for specific markets. investingLive is not responsible for any losses stemming from reliance on this information and does not endorse any opinions or analyses in its sources. We view the Australian dollar reaching an eight-month high as an important indicator, influenced by a weak US dollar and positive local data. This momentum creates opportunities for traders betting on further strength. While we believe the trend will continue, volatility remains a primary risk.

Factors Affecting AUD/USD Performance

The improving manufacturing PMI provides a solid foundation for the currency’s strength. Australia’s annual inflation rate remained at a two-year low of 3.6% in the first quarter of 2024, which is still above the central bank’s target. This situation lessens the likelihood of interest rate cuts and supports a stronger local currency. We should closely monitor the weaker US dollar, as markets have reduced expectations for aggressive rate cuts by the Fed. With strong US job data, the dollar could regain strength, which might limit the AUD/USD rally. We see a tug-of-war between the monetary policies of the two economies. Mr. Trump’s comments about tariffs and the Fed chairman add headline risk. Such statements can lead to sharp, unpredictable market movements, making them hard to trade. This geopolitical volatility must be included in our strategy as we prepare for sudden changes. Given these mixed signals, we are inclined to buy call options on the AUD/USD to benefit from potential further gains while strictly limiting our potential loss. The implied volatility for the pair has increased, showing this uncertainty, but it’s a manageable risk for defined rewards. This strategy allows us to capitalize on a sustained rally without exposing us to unlimited downsides. For those already holding long positions, buying out-of-the-money put options could provide effective protection. Historically, the AUD/USD can experience sharp corrections during risk-off events, like it did in early 2020. A low-cost put option serves as an insurance policy against similar big drops. Create your live VT Markets account and start trading now.

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