Australian Monetary Policy Focus
Attention in Australia is focused on a scheduled speech by Reserve Bank of Australia Governor Michele Bullock at 22:00 GMT. Her remarks are anticipated to provide insights into future monetary policy. The RBA left its cash rate unchanged at 3.60% while noting incomplete disinflation.
University of Melbourne data shows one-year inflation expectations in Australia rose to 4.8% in October, up from 4.7% in September. This persistent price pressure may influence the RBA’s approach in its upcoming meeting. Consequently, the short-term outlook for the AUD/USD pair remains uncertain, highly dependent on both Bullock’s comments and US Dollar trends.
The Australian Dollar’s slide to 0.6550 is a clear signal of renewed US Dollar dominance. With the US Dollar Index pushing towards multi-month highs, the path of least resistance for the AUD/USD pair is lower. We should be preparing for this trend to continue, paying close attention to the upcoming speech by RBA Governor Michele Bullock as a potential source of short-term volatility.
The strength in the Greenback is not surprising given the latest US CPI data for September 2025 came in at a stubborn 3.9%, well above the Federal Reserve’s target. This recent inflation print is causing the market to question the dovish signals from last month’s FOMC meeting minutes. As a result, large funds are increasing bearish option positions on currencies like the Euro and Yen, a defensive move that will likely keep the US Dollar well-supported.
Trading Strategies and Considerations
For the next few weeks, we should consider buying AUD/USD put options to protect against or profit from a further decline towards the 0.6400 level. If Governor Bullock’s speech fails to deliver a decisively hawkish tone, the Aussie’s current support will likely break under the weight of the US Dollar’s momentum. Selling out-of-the-money call options to collect premium could also be an effective strategy, as any rallies appear limited.
We remember the sharp swings in this pair during late 2023 and early 2024 when central bank policy expectations diverged. The current situation feels similar, suggesting that implied volatility may be undervalued. This brings the 0.6500 level into sharp focus, a key psychological support that held during the volatility we saw in the third quarter of 2024.
Therefore, any positions should be managed carefully around the RBA event risk. While the broader strategy points to being short the Australian Dollar, a surprisingly aggressive stance from Governor Bullock could trigger a sharp, albeit likely temporary, rally. A nimble approach using short-dated options could be the best way to navigate the immediate aftermath of her comments.
