The AUD/USD pair has reached a new yearly high of 0.6740 amid stronger performance by antipodeans and a favourable risk-on market sentiment. The rising appeal of risky assets is accompanied by a weakening US Dollar as market participants anticipate key data releases, including the Australian CPI and US NFP.
The US Dollar Index has seen a decline, trading near 98.30. Australian inflation is projected to slow slightly with a reported annual increase of 3.7% for November. The Reserve Bank of Australia’s decision to tighten monetary conditions hinges on the persistence of inflation. In the US, the upcoming Nonfarm Payrolls data for December is expected to shape expectations regarding future Federal Reserve policy.
AUD USD Technical Analysis
The AUD/USD trades above the 20-day EMA near 0.6723, maintaining a bullish outlook supported by momentum indicators like a 14-day RSI of 66.93. The rising 20-day EMA provides a dynamic level of support, with continued trading above this level suggesting potential gains towards 0.6935.
The US Dollar, heavily traded and the global reserve currency, is influenced significantly by Federal Reserve monetary policy. The Fed’s actions relate to interest rates and quantitative measures, impacting the Dollar’s value. Comprehensive metrics like QE and QT bring further effects, each pushing the Dollar in opposing directions of strength or weakness.
Looking back at this time in 2025, we saw the AUD/USD making a strong push above 0.6700, fueled by a general risk-on mood in the market. That bullish sentiment was based on a weakening US Dollar and the hope that inflation would remain a concern for the Reserve Bank of Australia. The market environment we face today, however, requires a much different approach.
The fundamental picture has shifted dramatically over the past year. Recent data showed Australian inflation has cooled significantly, with the Q4 2025 Consumer Price Index coming in at 2.8%, which is squarely within the RBA’s target range. In the United States, last week’s Nonfarm Payrolls report for December 2025 indicated a slowing labor market, with job additions of only 160,000, leading markets to price in potential Federal Reserve rate cuts later this year.
Market Outlook Shift
Given this, the case for a persistently strong Aussie dollar that we saw in early 2025 is no longer compelling. Traders should be cautious of holding long positions based on last year’s logic. We believe derivative strategies that benefit from range-bound price action or a potential decline, such as selling call spreads or buying puts, should be considered.
The key technical levels from a year ago tell an important story. The pair never managed to sustain a rally towards the October 2024 high of 0.6935 and is now trading below the 20-day moving average that once acted as support. That previous breakout point around 0.6700 has now become a significant level of resistance.
Furthermore, the US Dollar Index, which was struggling near 98.30 back then, has found renewed strength on the back of global economic uncertainty. Today, the index is trading firmly around 104.20. This provides a major headwind for any substantial gains in the AUD/USD pair.
The optimistic breakout momentum of early 2025 has faded as central bank policies appear to be diverging in the opposite direction than was anticipated. We should not expect a repeat of last year’s performance and should position for a more muted or even bearish outlook in the coming weeks. The focus will now turn to this month’s inflation and employment figures to confirm this change in trend.
