AUD/USD Near $0.69 as RBA Hike Bets Clash With Fed Uncertainty in 2026
The Australian dollar is trading near $0.6910, extending its recent rally after climbing from the $0.6600 base earlier this month...
Quick overview
- The Australian dollar is trading near $0.6910, supported by expectations of a potential rate hike from the Reserve Bank of Australia.
- The US Dollar Index is under pressure as investors await the Federal Reserve's policy decision and the appointment of a new Fed Chair.
- Market sentiment favors a controlled pullback in AUD/USD, with key support levels identified for potential buying opportunities.
- Overall, the outlook remains bullish for the Aussie, but traders are advised to exercise patience and wait for better risk-reward setups.
The Australian dollar is trading near $0.6910, extending its recent rally after climbing from the $0.6600 base earlier this month. The move has been driven by a softer US dollar and growing expectations that the Reserve Bank of Australia (RBA) may tighten policy at its February 3 meeting. During the European session, AUD/USD briefly touched $0.6933 before easing, reflecting early signs of consolidation rather than a sharp reversal.
On the US side, the US Dollar Index (DXY) remains under pressure, trading near 97.10, down roughly 0.35% on the day. Investors have grown cautious ahead of two key developments: the upcoming Federal Reserve policy decision and speculation surrounding the appointment of a new Fed Chair. Markets broadly expect the Fed to keep rates unchanged in the 3.50%–3.75% range, according to CME FedWatch data, but uncertainty around future leadership has weighed on the greenback.
RBA Rate Expectations Support the Aussie
Support for the Australian dollar has strengthened as traders increasingly price in tighter policy from the RBA. Markets now assign roughly a 60% probability of a rate hike in February, a shift that has helped keep AUD/USD well bid despite near-term hesitation.
Attention is also turning to Australia’s Q4 Consumer Price Index, due Wednesday. A firmer inflation print would reinforce the case for higher rates and could extend the Aussie’s advantage against a softer US dollar. For now, investors appear reluctant to take aggressive positions until both central banks provide clearer guidance.
AUD/USD Technical Picture Shows Consolidation
From a technical perspective, AUD/USD remains constructive but stretched. On the 4-hour chart, price continues to trade above a rising trendline that has guided higher lows since early January. However, the rally has stalled just below $0.6940, where trendline resistance and the 0% Fibonacci retracement from the prior downswing converge.
Momentum indicators suggest caution. The RSI near 80 signals overbought conditions, often a precursor to shallow pullbacks rather than trend failure. Key levels to watch include:
- $0.6870: 0.236 Fibonacci support
- $0.6830–$0.6800: Trendline and 50-EMA confluence
- $0.6770: Deeper support that preserves the bullish structure
A controlled pullback into these zones could reset momentum. A sustained break above $0.6940 would reopen the path toward $0.7020 and $0.7070, while a move below $0.6770 would signal a broader range rotation.
AUD/USD Outlook: Pullbacks Favored Over Chasing
With RBA expectations supporting the Aussie and Fed uncertainty weighing on the dollar, the broader bias remains upward. Still, near-term price action favors patience, with pullbacks offering better risk-reward than chasing strength.
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