The AUD/USD pair dipped to approximately 0.6680 during the European trading session on Wednesday as the US Dollar Index hit a fresh weekly high. FOMC minutes revealed policymakers’ inclination towards more interest rate cuts to alleviate pressure on the job market, despite a recent rate reduction of 25 basis points set between 3.50%-3.75%.
The US Dollar Index, monitoring the USD against six major currencies, reached near 98.35. The FOMC minutes indicated that most participants preferred a neutral stance to prevent job market decline. Conversely, the Australian Dollar maintains lower trading levels as the year 2025 approaches, with inflation data being the main concern for 2026.
Technical Overview
Technically, the AUD/USD trades slightly lower near 0.6685 but remains above a rising 20-day Exponential Moving Average (EMA) at 0.6651. A positive 14-day RSI at 61 indicates bullish momentum. Sustained finishes above the rising average are seen as a continuation of the advance, with a daily close above 0.6725 aiming towards 0.6800.
FOMC minutes published by the Federal Reserve provide insights into future US interest rate policy, impacting USD strength. Released three weeks post-policy decision, they guide the economic outlook and market reactions.
As we close out 2025, the AUD/USD is seeing a minor dip near 0.6680, mostly because of short-term strength in the US dollar. However, the Federal Reserve’s latest meeting minutes point towards a policy of cutting interest rates to support the American job market. This suggests that any strength in the US dollar might not last long into the new year.
Monetary Policy Influences
We see this as a significant signal, especially with the latest data from November 2025 showing the US unemployment rate ticking up to 4.1%. The Fed has clearly stated its goal is to prevent job market weakness, reinforcing our belief that its path is towards lower rates. Historically, a dovish Fed has put downward pressure on the US dollar.
In contrast, the Reserve Bank of Australia is facing a different problem with persistent inflation. The latest quarterly figures from 2025 showed Australian inflation remaining stubbornly high at 3.8%, well above the target range. The RBA has indicated it is prepared to raise interest rates again if this continues into 2026.
This growing difference in policy between a rate-cutting Fed and a potentially rate-hiking RBA creates a strong case for AUD/USD to move higher in the coming weeks. The technical picture supports this view, with the pair holding above its rising 20-day average. We are viewing any dips towards the 0.6650 level as potential buying opportunities.
For derivative traders, this outlook suggests buying AUD/USD call options with strike prices near 0.6750 or 0.6800 could be a viable strategy. Considering expiries in late January or February 2026 would give the trade enough time to play out as the market digests the central banks’ diverging paths. The Relative Strength Index at 61 confirms there is still room for upward movement before conditions become overbought.
Alternatively, selling cash-secured put options with a strike price below the key support level, such as 0.6600, could be a way to generate income. This strategy profits if the AUD/USD stays above that level, which we expect. Traders should prepare for increased volatility around the next Australian inflation data release in early 2026.
