AUD/USD rose for a third day, trading near 0.7240 in Asian hours on Thursday. The move followed Australia’s March Trade Balance release.
Australia recorded a Trade Deficit of $1,841M in March. This compared with a revised $5,026M surplus in February (previously $5,686M), versus expectations for a $4,250M surplus.
Trade Balance Details
Exports fell 2.7% month-on-month after a 4.2% rise previously. Imports jumped 14.1% after a prior 2.7% decline.
Reports said the US and Iran may be moving towards an agreement to end the war. The BBC said Iran described a US proposal as “still being considered”, and reports mentioned a one-page memorandum of understanding that would gradually reopen the Strait of Hormuz and lift the American blockade on Iranian ports, with nuclear talks later; no agreement has been reached.
CNBC reported President Donald Trump said Iran would be bombed “at a much higher level” if it does not agree to a peace deal. Trump also said Operation Epic Fury would end if Iran “agrees to give what has been agreed to”.
The US Dollar may face pressure if easing price concerns lead the Federal Reserve to cut interest rates.
How The Backdrop Changed
Looking back at the analysis from early 2025, we can see the AUD/USD was trading strongly around 0.7240 despite a surprise trade deficit. That period’s optimism was fueled by hopes of a resolution in the Middle East and a potential US Federal Reserve pivot. Today, the currency pair is trading much lower, near 0.6650, reflecting a significant shift in the economic landscape.
The trade balance situation has since improved from the deficit we saw back in March 2025. Australia’s latest data for April 2026 showed a trade surplus of A$6.5 billion, supported by a recent recovery in iron ore prices to over $115 per tonne. This stands in stark contrast to the unexpected deficit last year and provides some underlying support for the Aussie dollar.
Geopolitical risks have also evolved since the talk of “Operation Epic Fury” last year. While global tensions remain, the specific conflict premium that was pressuring markets in 2025 has largely subsided, leading to lower volatility in energy and currency markets. This has allowed traders to focus more on fundamental economic data rather than headline risks.
The US Dollar’s strength is now a dominant theme, directly opposite to the speculation of rate cuts we saw in 2025. The Fed has held rates steady for the past six months, as the latest US CPI data for April 2026 came in at a stubborn 2.9% year-over-year. This has quashed expectations of imminent easing and kept the greenback well-supported against other currencies.
Given this environment, derivative traders should consider strategies that reflect a range-bound or cautiously bearish outlook for AUD/USD in the coming weeks. Selling out-of-the-money call options with strike prices around 0.6750 could be a viable strategy to capitalize on the strong resistance and the powerful US dollar. This approach allows us to collect premium while the fundamental picture prevents a significant Aussie dollar rally.
