Traders in the AUDUSD market are finding it tough to agree on a clear direction. Recently, the pair dropped below the 38.2% retracement level and the 100-hour moving average, hitting a low of 0.6503, but then bounced back. This rebound pushed the pair above the 200-hour moving average as the US dollar faced selling pressure early in the North American session. However, the upward movement halted near 0.6537, leading it to fall back below the 200-hour moving average.

Technical Indecision

Buyers and sellers have not been able to break through key technical levels, leaving the market uncertain. For a clear directional trend to emerge, the price needs to stay above the 200-hour MA or below the 100-hour MA and retracement support. Given the uneven price movement, volatility is high, but the resistance zone between 0.6536 and 0.6542 is crucial. Even after a brief spike above this area last Wednesday, resistance remains strong. Today’s rebound challenges the negative sentiment, yet resistance continues. Market participants are watching closely to see which side gains strength.

Options Strategy

The indecision noted by Michalowski is a significant indicator for options traders. The inability of buyers and sellers to gain traction at key moving averages shows a lack of strong direction. This volatile price action makes straightforward bets using futures quite risky. In this environment, we advise using options to better manage risk. One possible strategy is a long straddle, where a trader buys both a call and a put option at the same strike price. This way, they can benefit from a big price movement in either direction without needing to predict when or which way it will happen. On the fundamental side, recent data suggests a stronger US dollar, which creates a bearish outlook for this currency pair. The latest annual US Consumer Price Index is at 3.5%, which is higher than expected and indicates that the Federal Reserve might delay any interest rate cuts. This divergence in policy usually strengthens the US dollar against other currencies. On the flip side, several factors are pressuring the Australian dollar, which also suggest a downward movement. Australia’s inflation rate has dropped to 4.1% quarterly, giving the Reserve Bank of Australia more incentives to consider rate cuts sooner than the US. Additionally, the price of iron ore, a key export for Australia, has fallen over 20% since January due to worries about China’s property market, reducing demand for the Australian dollar. Looking at history, when the Federal Reserve adopts a more aggressive stance than the Reserve Bank of Australia, it often leads to continued downward pressure on this currency pair. We have seen similar patterns in the past when US interest rate expectations outpaced those in Australia. This historical context strengthens the belief that the current technical stalemate will likely resolve downwards. Thus, we recommend traders should be ready for a possible break below the discussed support levels. Buying put options provides a way to prepare for this scenario with a defined risk. This strategy could be profitable if sellers finally gain momentum and push the price below the 100-hour moving average and the important 0.6500 level. Create your live VT Markets account and start trading now.

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