The AUD/USD pair is rising as the US dollar weakens. This weakness follows comments from Fed’s Kashkari, who hinted at a possible rate cut in September due to disappointing US job data. Before the non-farm payroll report, the market expected stronger results, leading to a new rate cut prediction of 60 basis points by year-end, up from 35 basis points. If the economy continues to show soft data, Fed Chair Powell may consider cutting rates. In another update, the ISM Services PMI reached a new high, and upcoming US jobless claims could change the view on the labor market’s strength. Weak jobless claims could further pressure the dollar. Australia’s inflation report also eased, indicating that the Reserve Bank of Australia may move forward with expected rate cuts.

Technical Analysis

The AUD/USD has been rising since the weak NFP data. On the daily chart, it is trading between crucial levels, with more details available from shorter time frames. The 4-hour chart shows a break above minor support, boosting the rally with bullish momentum. A pullback might lead buyers to rely on the upward trendline for continued gains, while sellers are watching for a break lower to target support. The 1-hour chart indicates the price is near the upper daily range, suggesting possible pullbacks aligned with risk management strategies. In the current situation, the weakening US dollar is the main focus. Last Friday’s Non-Farm Payrolls report from August 1st, 2025, was softer than expected, with around 170,000 jobs added, significantly changing Fed expectations. The market now reflects a greater than 70% chance of a rate cut in September, according to tools like CME FedWatch. However, we need to stay alert for conflicting signals that could bring volatility. Today’s jobless claims data reported a robust labor market, with claims at 215,000, which was below expectations. This kind of data, along with high prices in recent service sector reports, adds uncertainty and may slow the dollar’s decline. The mix of dovish Federal Reserve comments and certain economic strengths indicates that implied volatility in AUD/USD options might be undervalued. If the market is too relaxed about a straightforward dollar decline, any surprises could lead to increased volatility. We should consider strategies that can take advantage of rising volatility.

Trading Strategies

For traders anticipating the upward trend to continue, the technical outlook suggests aiming for the 0.6600 level. One straightforward approach is to buy AUD/USD call options that expire in late September. This can capture potential momentum from the Jackson Hole Symposium and the Fed meeting, providing a clear way to profit if the rally continues as expected. Conversely, we must also prepare for a potential reversal if the dollar finds support. The technical analysis points to the trendline and the 0.6485 level as critical areas to monitor. If the price breaks below this support, it could quickly dip back to the 0.6350 zone, making protective put options a wise hedge for long positions. Historically, a similar pattern occurred in 2019 when the Fed shifted from increasing rates to cutting them, resulting in notable dollar weakness. This historical context supports the idea that the dollar’s most probable direction is lower for now, suggesting that selling dollar strength rather than buying dollar dips has a higher probability of success. On the Australian side, the recent quarterly inflation report showing a drop to 3.8% gives the Reserve Bank of Australia a solid reason to cut rates. This could limit the AUD/USD rally as we near the 0.6600 resistance. Selling out-of-the-money call spreads might be a useful strategy to generate income if we believe the pair will face challenges breaking higher. Create your live VT Markets account and start trading now.

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