The Australian dollar held near its Tuesday open in North American trade, with AUD/USD flat around 0.7170 as markets awaited Australia’s CPI release on Wednesday. Sentiment was tempered after US military strikes on Iran disrupted risk appetite that had improved on weekend reports of progress in US–Iran negotiations. In the US, household sentiment weakened as higher energy prices fed through the economy: the Conference Board Consumer Confidence Index slipped to 93.1 in May, although it remained above the 92 consensus in a Bloomberg poll.
Attention is on Australian inflation, with headline CPI expected to ease to 4.4% year on year in April from 4.6% in March, while Trimmed Mean CPI is forecast at 3.4% from 3.3%. The Reserve Bank of Australia has tightened three times this year for a total of 75 basis points, while firmer recent employment data has raised questions about policy restrictiveness. US releases due include Durable Goods Orders, the second estimate of Q1 2026 GDP, labour-market data and the Core PCE Price Index, the Fed’s preferred inflation gauge.
Options Strategies Ahead Of CPI Release
With the Australian Dollar trading flat around 0.7170, we see the market holding its breath ahead of tomorrow’s critical CPI inflation data. The current quietness presents an opportunity, as a significant price move is likely once the numbers are released. We believe using options to position for this expected volatility is the most prudent strategy.
If inflation comes in hotter than the expected 4.4%, it will increase pressure on the Reserve Bank of Australia to continue its rate hikes. We note the RBA’s minutes from early May 2026 stressed a data-dependent approach, making this release a key trigger for their next move. In this scenario, we would look to buy call options with strike prices above 0.7200 to capitalize on a potential surge in the Aussie dollar.
Conversely, a softer inflation reading would give the RBA cover to pause its tightening cycle, especially given recent concerns about slowing growth. A miss on the data could send the AUD/USD pair sharply lower. To prepare for this, we are considering put options with strikes set just below the key technical support level of 0.7130.
Economic Backdrop And Technical Levels
This strategy is supported by the broader economic picture, with Australia’s unemployment rate holding strong near 4.1%, giving the RBA flexibility to focus on inflation. Meanwhile, with the latest US Core PCE inflation figure at 2.8%, the Federal Reserve’s own policy path remains a key factor influencing the US dollar’s strength. The upcoming US data on GDP and PCE will add another layer of volatility that traders must watch.
Given the uncertainty in direction but the high probability of a sharp move, we are also evaluating long straddle positions. This involves buying both a call and a put option, which would profit from a large price swing in either direction. We recall the significant moves in the AUD during the 2022-2023 tightening cycle, where CPI reports frequently caused large, single-day price action.
The technical chart provides clear levels to guide our option strike prices. The cluster of support around the 0.7100 to 0.7130 area serves as a logical zone for our put strikes. For the bullish case, we will use the current price as a base and look toward higher resistance levels for our call option targets.
