AUD/USD gave up earlier gains on Friday after stronger US Nonfarm Payrolls data supported the US Dollar. Trading was subdued due to thin liquidity during the Good Friday holiday.
AUD/USD was near 0.6900 after reaching an intraday high of 0.6916. The US Dollar Index (DXY) held gains above 100.
Us Jobs Report Lifts Dollar
The US economy added 178K jobs in March, above expectations of 60K, according to the US Bureau of Labor Statistics. February was revised to a loss of 133K jobs from a previously reported decline of 92K, while the unemployment rate fell to 4.3% from 4.4%.
Average Hourly Earnings rose 0.2% month-on-month in March versus a 0.3% forecast, down from 0.4% previously. Earnings increased 3.5% year-on-year, below the 3.7% forecast and down from 3.8%.
Markets reduced expectations for near-term rate cuts, with CME FedWatch showing rates priced to stay unchanged through 2026. Oil-related inflation risks were cited as a factor affecting the policy outlook.
China’s Manufacturing PMI rose to 50.4 in March from 49 and above expectations of 50.1, based on National Bureau of Statistics data. The Australian Dollar often reacts to shifts in Chinese economic activity due to Australia’s trade links with China.
With the US economy showing a strong jobs print but softer wage growth, we see a conflicting picture that points toward a capped range for AUD/USD. The push from strong US employment is being pulled back by the lack of wage inflation, suggesting traders should consider strategies that benefit from sideways movement. This makes selling options, like strangles or straddles, on either side of the current 0.6900 level an interesting play for the coming weeks.
Strategy Implications For Aud Usd
This view is strengthened by the latest US Consumer Price Index (CPI) data, which showed core inflation remains stubbornly high at 3.4%, well above the Federal Reserve’s target. This reinforces the market belief that the Fed will hold interest rates firm throughout 2026, putting a floor under the US Dollar. Therefore, we believe selling out-of-the-money call options on AUD/USD could be a prudent way to generate income, as a significant rally above 0.7000 seems unlikely.
On the other side, while the improvement in China’s manufacturing PMI is a positive sign for the Australian economy, we must weigh this against weakening commodity prices. Iron ore, a key Australian export, has recently slipped below $100 per tonne, a significant drop from its earlier highs this year. This headwind will likely limit any major upside for the Australian Dollar, containing its strength even when Chinese data looks promising.
The policy divergence between central banks will be the dominant theme. We see the Fed remaining on hold, whereas recent statements from the Reserve Bank of Australia suggest a more neutral-to-dovish stance, especially with domestic inflation showing signs of cooling faster than in the US. This fundamental difference supports a weaker outlook for the AUD relative to the USD, making strategies like bear call spreads attractive for those anticipating a gradual drift lower.
Looking back at 2025, we saw several false starts where the market incorrectly priced in aggressive Fed rate cuts, leading to sharp reversals. This memory is keeping traders cautious now, and we expect implied volatility in AUD/USD options to decline if the pair settles into a range. Selling this volatility could be a core strategy for derivative traders who believe the major economic data points will continue to pull the currency pair in opposing directions.
