In a 1-3 weeks view, recent observations had indicated that the ongoing strength of AUD might be overstretched. Although a new high of 0.6655 was reached, there was no marked increase in momentum. The analysis holds, unless there is a break below the strong support level of 0.6590, which would neutralise the current outlook for AUD.
Alternative Strategies for Limited Upside
Given the Australian Dollar’s weakening upward momentum, we should consider strategies that benefit from a limited upside. The potential test of 0.6660 offers a small window for gains, but the major resistance at 0.6685 appears to be a firm ceiling for now. Selling call options with a strike price at or above 0.6685 could be a way to generate income, capitalizing on the view that a significant breakout is unlikely in the coming weeks.
This cautious outlook is supported by recent fundamental data. China’s latest manufacturing PMI, released last week, came in at a soft 50.4, suggesting that the engine for Australian commodity demand is not running at full steam. Furthermore, the Reserve Bank of Australia’s minutes from its early December 2025 meeting revealed a growing debate about pausing rate hikes, which tempers enthusiasm for further AUD strength.
Balancing Factors Affecting AUDUSD
On the other side of the pair, the US dollar remains resilient following a stronger-than-expected Non-Farm Payrolls report last Friday, which has reinforced the Federal Reserve’s commitment to holding interest rates steady. We have also seen the price of iron ore, a key Australian export, retreat slightly to $115 per tonne after failing to break its November 2025 highs. These factors create a significant headwind for the AUD/USD exchange rate.
We can look back to a similar pattern in late 2023 when a multi-week rally in the pair stalled as it approached the 0.6800 level, showing that momentum can often fade at key resistance points. While the immediate upside seems capped, the underlying bullish trend remains intact as long as the price holds above the strong support at 0.6590. Therefore, traders could also consider selling put spreads with a strike price below 0.6590 to take advantage of range-bound conditions and time decay.
