AUD/USD Holds Above $0.6700 With $0.6765 in Focus Ahead of CPI and NFP
During the European trading session, the AUD/USD pair jumped to an intraday high of around $0.6740, extending its recent rally.
Quick overview
- The AUD/USD pair reached an intraday high of around $0.6740, supported by rising expectations for further rate hikes from the Reserve Bank of Australia.
- A weakening US dollar ahead of key economic data has allowed the AUD/USD to maintain its gains, despite ongoing geopolitical uncertainties.
- Analysts predict that if inflation remains persistent, the RBA may implement at least two more rate hikes, contrasting with expectations for future Federal Reserve rate cuts.
- Technically, the AUD/USD is holding above a rising trendline, with short-term support around $0.6700-$0.6705 and resistance near $0.6740.
During the European trading session, the AUD/USD pair jumped to an intraday high of around $0.6740, extending its recent rally. The Australian dollar stayed supported as expectations rose that the Reserve Bank of Australia (RBA) may not have finished tightening policy yet. In contrast, a softer US dollar helped the pair gain some momentum.
At the same time, the greenback began to weaken ahead of key US economic data, allowing AUD/USD to hold on to its gains after two days of raking it in. The markets are now all about waiting to see what happens with Wednesday’s Australia November CPI data, as it will be the next big clue on the direction the pair will take.
RBA Rate Hike Expectations Give the Aussie a Lift
The Aussie found renewed support after a big survey of leading economists by the Australian Financial Review suggested the RBA might be on track for at least two more rate hikes if inflation keeps being a problem. The poll said inflation’s still expected to stay pretty sticky over the next 12 months, which makes a stronger case for the RBA to keep raising interest rates.
The RBA’s December meeting minutes also lined up with this hawkish bI reading next month could make a rate increase more likely at the RBA’s meeting on February 3rd, keeping Australian interest rates attractiias, showing policymakers are still on the lookout to act again if inflation doesn’t start to come down a bit. Analysts say a very large Q4 CPve and therefore keeping the currency on a high.
US Dollar Struggles Ahead of Important Data
On the other side of the pair, the US dollar is looking weak with the dollar index drifting down toward 98.30. But even though the geopolitical situation is still pretty uncertain, markets have more or less written off those risks, and that means there’s less safe-haven demand for the dollar now.
Traders also have to factor in the big US Nonfarm Payrolls data coming up, with forecasts of job growth at a paltry 55,000. If that number comes in weaker than expected, it could add to worries about US economic momentum, keeping the dollar on the back foot.
Fed Policy Uncertainty Adds to the Dollar’s Problems
In contrast to rising expectations for the RBA, markets still expect the Federal Reserve to deliver two more interest rate cuts in 2026. Although the latest FOMC minutes suggested that policymakers are comfortable standing back if inflation eases gradually, all this uncertainty about future Fed leadership has added another layer of caution for dollar bulls.
AUD/USD Technical Analysis
Looking at it from a technical standpoint, the AUD/USD is trading near $0.6720 and holding up fairly well above the rising trendline that has been guiding the price higher since about mid-December. The last few days,, we’ve seen the price making higher lows with small lower wicks, which is a sign that demand is still firm rather than just a bit of aggressive buying.
The pair has just managed to retake the $0.6700-$0.6705 zone, which is now starting to look like short-term support. Resistance was tested near $0.6740, putting the brakes on gains for a bit. A clean break above that level would finally expose $0.6765 , followed by $0.6789, both of which are key previous resistance zones.
If we do see a sustained move below $0.6663, though, that could weaken the overall bullish structure, and then we’d see a bit more weakness toward $0.6632 and $0.6594. Even so, momentum indicators are looking pretty constructive with the RSI in neutral territory, so there’s still room for further upside without running into overbought conditions.
Trade Idea: Buy pullbacks toward $0.6705, with targets at $0.6765, and a stop below $0.6660.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Save