Chart 1: Leveraged funds slash AUD Shorts
Chart 2: Asset managers also materially reduce bearish AUD positioning

Option strikes

Investors see AUD/USD upside and downside as balanced. According to CME Group data on option strikes:

  • There is good-sized net demand for AUD/USD calls solidly between 0.61 and 0.64, and 0.65 and 0.67 (Chart 3).
  • In contrast, there is also material net demand for AUD/USD puts between 0.68 and 0.73.

What to watch: The next Federal Reserve rate decision on July 31 will be very important for AUD/USD, as will be the U.S. jobs report on August 2. Before then, on July 26, we get the closely watched U.S. PCE report. In Australia, keep an eye on Q2 CPI (July 31), the RBA rate decision (August 6), Q2 Wage Price Index (August 13) and the July Labour Force Survey (August 15).

Chart 3: Open interest in AUD/USD option strikes

FX investor risk appetite

CME Group has a range of FX volatility data to help investors track the level of volatility. We can also use FX volatility data to determine investor risk appetite. We find the shape of the FX volatility curve useful in this regard. When shorter-dated FX implied volatility is higher than longer-dated volatility, this suggests investors are worried or in panic mode. In contrast, when shorter-dated FX volatility is lower than longer-dated volatility, this suggests investors expect calm markets. The latest data finds:

  • The FX volatility curve currently remains at steeper levels than throughout most of 2023, suggesting investors remain calm. This is likely because economic growth has stabilized and conviction remains that easier central bank policy is coming this year (Chart 4). 
  • The move aligns with CME Group’s CVOL volatility indices, which have followed a similar dynamic to trade near year lows.
  • Outside FX, equity volatility remains historically low, while rates volatility remains high.
Chart 4: FX volatility curve remains steeper than throughout 2023