US Dollar Stability

The US Dollar remained stable after the Senate approved a temporary bill to fund the government until January. The US Dollar Index (DXY), which tracks the Greenback against six major currencies, was steady at around 99.60. In the US, both Democratic and Republican lawmakers supported the bill. They agreed to discuss extending Affordable Care Act subsidies in December. The bill also highlights how the Federal Reserve’s policies affect the US Dollar, noting that interest rate changes and actions like quantitative easing (QE) and tightening (QT) can influence its value. The Reserve Bank of Australia (RBA) is indicating a tight monetary policy for the future, pushing the AUD/USD down to 0.6530. Deputy Governor Hauser mentioned that there is no room for rate cuts soon, suggesting the Australian Dollar could strengthen further. Traders should look for opportunities that could benefit from the Aussie’s potential rise in the coming weeks. This outlook is supported by rising domestic inflation, which reached 1.3% in the third quarter. The October jobs report showed unemployment unexpectedly dropped to 3.4%, giving the RBA little reason to alter its strict approach.

AUD Strategies

Meanwhile, the US Dollar is stable now that the government funding issue is sorted until January. The latest US Core PCE data showed inflation dropped to 2.8%, indicating that the Federal Reserve can be more patient compared to the RBA. This growing difference in policies between the two central banks is a key focus for us. Considering this situation, we’re exploring strategies like buying AUD/USD call options to take advantage of potential gains while managing risk. This reminds us of the 2021-2022 period, when currencies supported by strong central banks often outperformed. Long positions in AUD futures could also offer direct exposure to this trend. The main risk to this viewpoint is a surprise increase in US inflation data, which could quickly change Fed expectations. We will closely monitor the upcoming US CPI release for any signs of rising prices. For now, staying above the 0.6500 level is crucial for maintaining bullish momentum. Create your live VT Markets account and start trading now.

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