AUD\/USD is consolidating near the 0.6600 mark, just shy of its two-month high, as traders await key US inflation data. The spot prices are likely to continue rising, but traders are cautious and await the US PCE for cues to extend the uptrend.<\/p>\n
The US Personal Consumption Expenditure (PCE) Price Index for October will be released soon. This measure, favoured by the US Federal Reserve, could influence the USD’s price dynamics if it signals rate cut paths. Meanwhile, divergent Fed-RBA policy expectations provide support for the AUD\/USD pair.<\/p>\n
Recent US data points to a cooling economy with a softening labour market, and comments from Fed officials suggest an interest rate cut is expected in December. Traders are pricing in a 90% chance of a 25 bps rate cut, which has kept the US dollar low.<\/p>\n
RBA Governor Michele Bullock noted that inflation remains beyond the 2%-3% target. Speculation about a potential rate hike supports the AUD, backing the AUD\/USD. The Core PCE metric provides insights into price changes, excluding volatile food and energy. A higher reading could boost the USD by indicating a hawkish shift in Fed policy.<\/p>\n
With the US Federal Reserve widely expected to cut rates next week, we are seeing a clear policy split from the Reserve Bank of Australia. The latest US jobs report confirmed a cooling economy, with job additions slowing to around 150,000 in November 2025, while Australia\u2019s inflation remains stubborn at 3.8%, well above its target. This fundamental divergence suggests a continued upward path for the AUD\/USD pair.<\/p>\n
The main event today is the US Core PCE inflation report, which is the Fed\u2019s preferred measure. We are expecting it to hold steady at 2.9%, reinforcing the case for a rate cut and further pressuring the US Dollar. Looking back from our perspective in late 2025, this 2.9% level is a world away from the peaks above 5% we saw during the 2022-2023 period, underscoring the success of the disinflationary trend.<\/p>\n
For traders who believe the AUD\/USD will continue its uptrend, buying call options with January 2026 expiries could be a prudent strategy. This allows us to benefit from a potential move towards the 0.6700 or 0.6800 levels in the coming weeks. Using options limits our downside risk to the premium paid, which is valuable given the potential for short-term volatility around data releases.<\/p>\n
Given the immediate uncertainty surrounding today’s PCE number, an alternative approach is to trade the expected price swing itself. A long straddle, which involves buying both a call and a put option with a short-term expiry, would profit if the data causes a larger-than-expected move in either direction. This strategy is less about the direction and more about capitalizing on the market’s reaction to this key inflation print.<\/p>\n
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