AUD/USD slipped as weaker Australian inflation data weighed on the AUD, while uncertainty over a possible US-Iran peace deal kept the USD underpinned. The pair was trading near 0.7136, down about 0.44% on the day. Australia’s CPI slowed to 4.2% year on year in April from 4.6% in March, undershooting the 4.4% consensus, while the RBA’s Trimmed Mean CPI rose to 3.4% from 3.3% and met forecasts. With soft labour signals also in view, markets pared expectations for near-term RBA rate hikes.
Geopolitical headlines added support to the dollar, after Iranian State TV said an initial unofficial framework for an MOU had been prepared, only for the US to deny the report and label an interim deal draft “a complete fabrication”. The Dollar Index (DXY) hovered around 99.20 after dipping below 99.00 earlier in the European session. Technically, AUD/USD remained below the 20-day Bollinger SMA at 0.7187 yet above the 100-day MA at 0.7038, with RSI drifting towards the mid-40s and MACD slightly negative. Resistance sits at 0.7187 then 0.7274, while support lies near 0.7100 and 0.7038.
Australian Fundamentals and RBA Outlook
The softer Australian inflation figure is a key signal for us. With headline CPI easing to 4.2% year-over-year, our expectation is that the Reserve Bank of Australia will remain on hold for the foreseeable future. This makes it difficult to be bullish on the Aussie dollar right now.
This data point doesn’t exist in a vacuum, as Australia’s latest GDP figures for the first quarter of 2026 also showed a slowdown to just 0.2% growth. Looking at historical data, when both inflation and growth cool simultaneously, the RBA typically enters a prolonged pause. We believe the market is now correctly pricing out any rate hikes for the remainder of 2026.
US Dollar Dynamics and AUD/USD Trading Strategies
On the other side of the trade, the US Dollar remains supported by the uncertainty surrounding the Iran negotiations. Furthermore, the most recent US Non-Farm Payrolls report showed a robust addition of 265,000 jobs in April, reinforcing the Federal Reserve’s stance to keep interest rates steady. This economic strength in the US creates a clear divergence against Australia’s softening outlook.
Given this backdrop, we are looking at strategies that profit from a decline in AUD/USD over the next few weeks. Buying AUD/USD put options with a strike price near 0.7050 appears attractive, targeting a move toward the 100-day moving average support level. This provides downside exposure while clearly defining our maximum risk.
We will use the lower Bollinger band around 0.7100 as a key trigger point for entering or adding to these positions. A sustained break below that support would confirm the bearish momentum for us. For a more conservative approach, a bear put spread could also be implemented to lower the upfront cost of the position while targeting a modest decline.
