AUD/USD erased earlier gains after sellers stepped in above 0.7100. The pair fell 0.23% to around 0.7065 in late Asian trading on Monday, as the Australian Dollar weakened.
The US Dollar rose against the Australian Dollar, but it underperformed most other major currencies as new uncertainty around US trade policy weighed on sentiment. The US Dollar Index (DXY) was down 0.3% near 97.50.
Trade Policy Uncertainty
The US Supreme Court ruled that President Donald Trump exceeded his authority under the International Emergency Economic Powers Act (IEEPA) when backing broad tariffs. The decision also struck down additional import duties. Trump later announced 15% global tariffs.
On the technical side, AUD/USD has stayed in a 0.7045–0.7100 range for more than a week. The 20-day EMA is rising at 0.7015, while the 14-day RSI remains between 40.00 and 60.00.
If momentum improves, the pair could climb toward the 12 February high of 0.7147. If the RSI weakens, it may signal consolidation and softer near-term momentum.
The US Dollar is the most traded currency in the world. It accounts for more than 88% of global FX turnover—about $6.6 trillion per day in 2022. The Federal Reserve targets 2% inflation and uses interest rates, QE, and QT to influence the Dollar.
Looking Back At Last Year
Last year showed how quickly unexpected trade policy headlines can move AUD/USD. In 2025, the pair repeatedly struggled around 0.7100, and that period helped shape later market behavior. The main lesson was clear: global trade uncertainty often hurts the risk-sensitive Australian Dollar more than the US Dollar, even when the US is the source of the policy shock.
As of February 23, 2026, the fundamental outlook is clearer and is largely driven by central bank policy differences. Recent US inflation data showed core CPI still elevated at 3.1%, which has kept the Federal Reserve from signaling near-term rate cuts. By contrast, Australia’s latest quarterly inflation report showed inflation cooling to 2.8%. This has increased expectations that the Reserve Bank of Australia could cut rates by the third quarter.
This widening policy gap is weighing on AUD/USD, which is trading near 0.6650. The interest rate difference favors holding US Dollars and remains a strong headwind for the Aussie. Iron ore, Australia’s top export, has also fallen about 8% since December 2025 due to concerns about global industrial demand.
For derivatives traders, this setup points to a bearish bias for AUD/USD over the next few weeks. One simple approach is buying put options with a strike near 0.6500. This provides downside exposure while limiting risk, unlike shorting spot FX directly.
Implied volatility has been moderate, with the CVOL index for major pairs near 8.5, so option premiums have not been unusually expensive. If you expect the pair to move sideways or drift lower, a bear call spread is another option. This involves selling a call slightly above current resistance and buying a further out-of-the-money call to cap risk, allowing you to collect premium if AUD/USD stays below the short strike.
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