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AUD/USD trades to new 1 year high on commodity boom.
AUDUSD has gained 4.5% in the past 2 months and now trades at a new 1 year high on the back of a surge in commodity prices, fastest annual inflation in 7 months and central bank divergence.
- Commodity boom: Gold is set to overtake LNG as Australia’s second‑largest export after a 64% surge last year, with exports expected to jump 25% YoY. Copper has also hit record highs, driven by electrification, AI data‑centre demand, and renewable‑energy equipment manufacturing.
- CPI creeping up: Inflation rose to 3.8% YoY in October—its fastest pace in seven months and above the RBA’s 2–3% target. Unemployment has also dipped to 4.3% due to a lower participation rate.
- RBA stance: The RBA has turned more hawkish, signaling that rate hikes are possible in 2026 amid concerns over persistent inflation. Markets has now priced in 1–2 hikes this year.
- Fed stance: In contrast, the Federal Reserve is leaning toward more cuts in 2026, aided by a potentially dovish governor taking office in January. Markets are pricing roughly 2cuts this year.
If you are bullish on AUDUSD
Consider buying a Risk Reversal to receive premiums while expressing a bullish view on AUDUSD. Use the 2-week date of 20th Jan to cover the Australia Nov CPI on 7th Jan, US Dec NFP on 9th Jan and US Dec CPI on 13th Jan.
- Buy 2 week (20 Jan) AUDUSD call option at strike 0.6780 (~30 delta).
- Sell 2 week (20 Jan) AUDUSD put option at strike 0.6700 (~30 delta).
Risks
Watch out for AUDUSD breaking below 0.6698 as this strategy could lead to losses below that level. Both the max loss and max profit are unlimited – losses accumulate if AUDUSD falls below 0.6698 (from the put option) and profits start to grow if AUDUSD rises above 0.6780 (from the call option).
If AUDUSD closes below 0.6700 at expiry, you will be long AUDUSD at 0.6700. This works well if you were bullish AUDUSD to start with and wish to buy it anyway. If AUDUSD closes above 0.6780 at expiry, you will be long AUDUSD from 0.6780, participating in the potential move higher.
If you are bearish on AUDUSD
Consider selling a Risk Reversal to receive premiums while expressing a bearish view on AUDUSD. Use the 2-week date of 20th Jan to cover the Australia Nov CPI on 7th Jan, US Dec NFP on 9th Jan and US Dec CPI on 13th Jan.
- Sell 2 week (20 Jan) AUDUSD call option at strike 0.6770 (~30 delta).
- Buy 2 week (20 Jan) AUDUSD put option at strike 0.6695 (~30 delta).
Risks
Watch out for AUDUSD breaking above 0.6771 as this strategy could lead to losses above that level. Both the max loss and max profit are unlimited – losses accumulate if AUDUSD rises above 0.6771 (from the call option) and profits start to grow if AUDUSD falls below 0.6695 (from the put option).
If AUDUSD closes above 0.6771 at expiry, you will be short AUDUSD at 0.6771. This works well if you were bearish AUDUSD to start with and wish to sell it anyway. If AUDUSD closes below 0.6695 at expiry, you will be short AUDUSD from 0.6695, participating in the potential move lower.