On the daily chart, AUDUSD is continuing its upward movement, boosted by Powell’s dovish comments. It is now aiming for the top trendline. In the 4-hour chart, we see bullish momentum, marked by an upward trendline, with buyers and sellers trading around new highs and lows.

The 1 Hour Chart

The 1-hour chart shows a temporary pause in the rally as the market waits for US inflation data. Important levels to monitor are 0.6580 for possible pullbacks and 0.6620 for additional upward movement. Key upcoming releases include the US PPI, CPI, Jobless Claims, and University of Michigan Consumer Sentiment reports. The US dollar continues to weaken as the market processes this morning’s soft August 2025 inflation data. The core Consumer Price Index (CPI) is now at 2.8% year-over-year. This supports our belief that the Federal Reserve will lower interest rates at its next meeting, with fed funds futures indicating an 85% chance of a 25 basis point cut. The dollar’s trend appears to be downward as we approach this decision. For derivative traders, this environment is good for strategies that profit from a continued rise in the AUDUSD pair. Buying call options with a strike price near 0.6650 could help us benefit from the expected upward momentum towards the upper trendline discussed earlier. This strategy limits our maximum risk while offering a significant potential reward if the dollar continues to weaken.

The Australian Dollar’s Stability

However, we should be careful, as the dovish sentiment towards the Fed may be overstated. We saw a similar situation in late 2023 when aggressive rate cut expectations led to a dollar rally. A wise hedge would be to purchase put options with a strike price just below the key upward trendline, around 0.6550. This protects against any unexpected strength in upcoming US economic reports, such as Friday’s consumer sentiment data. The Australian dollar’s stability supports the pair’s upward trend, with its inflation rate around 3.2%, higher than in the US. Thus, the Reserve Bank of Australia is likely to keep rates unchanged, creating a policy divergence that favors a stronger Aussie against the greenback. This fundamental difference is the primary driver we anticipate for this trade in the coming weeks. Create your live VT Markets account and start trading now.

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