The AUD/USD pair hit 0.6960 on Tuesday, rising 0.60%. This is the highest level since February 2023. The increase is supported by strong Australian economic data and a weak US Dollar. Australia’s 3-year bond yield rose to 4.27%, the highest since November 2023. Indicators such as employment rates and PMI data suggest that the Reserve Bank of Australia may keep a strict policy despite trends toward lower inflation.

Upcoming Australian Inflation Data

The upcoming Australian inflation data is expected to impact future monetary policy. Although inflation is easing, it is still above the central target of 2%-3%. This could delay any easing in monetary policy. The US Dollar is facing challenges from political and institutional uncertainties, which are affecting investor confidence. Concerns about a possible US government shutdown and discussions at the Federal Reserve are adding to this pressure. US labor market indicators show a slowdown in hiring, which could lead the Federal Reserve to adopt a more cautious tone. This situation could prompt a shift from the US Dollar to other currencies, like the Australian Dollar, which benefits from higher yields. As Australian yields remain high and the US Dollar stays under pressure, the AUD/USD pair is likely to trade at or near its peaks. The heat map shows other currencies’ trends, highlighting the Australian Dollar’s strength against the USD.

AUD/USD Prospects and Strategies

With the AUD/USD moving past 0.6950 to its highest level since early 2023, the upward trend looks strong. We believe the easiest direction is upward, so derivative strategies should focus on further AUD strength compared to the USD. This is due to the clear difference in monetary policy—Australia’s fundamentals remain robust while the US outlook weakens. Strong yields support the Australian economy, and we expect this to continue. After the last quarter’s inflation data in 2025 showed a stubborn 3.9%, well above the target range, the Reserve Bank of Australia is unlikely to lower its 4.35% cash rate. Thus, buying call options on AUD/USD seems like a smart way to benefit from potential upside in the coming weeks. On the other hand, uncertainty is pressuring the US Dollar, making it a good candidate for shorting. The threat of a partial government shutdown, which was narrowly avoided in late 2025, creates political risk that investors are wary of. Combined with a slowing US job market—where forecasts for the next report predict a modest 160,000 jobs added—this supports expectations for Federal Reserve rate cuts later this year. The upcoming Australian inflation data will be a key driver, likely increasing volatility. A strong report would likely push the pair higher, making current long positions more profitable. We recommend that traders monitor the implied volatility on options contracts, as it is likely to rise before this important data release. Create your live VT Markets account and start trading now.

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