The Australian Dollar remained steady following China’s Manufacturing Purchasing Managers’ Index results. The index rose to 50.1 in December, surpassing the previous 49.2 and market expectations. Trading volumes were low due to the New Year’s holiday in Australia. The AUD\/USD pair saw little movement, maintaining its position over back-to-back sessions.<\/p>\n
Forecasts indicate the Reserve Bank of Australia (RBA) might increase interest rates if inflation persists. RBA discussions revolved around potential rate hikes under specific conditions in 2026. Minutes from the RBA December meeting suggested readiness to tighten policy, relying on the forthcoming Q4 CPI report on January 28. Analysts predict a rate hike at the RBA\u2019s February meeting if core inflation is notably strong.<\/p>\n
In the US, the Dollar Index hovered around 98.20. FOMC minutes suggested pausing rate cuts if inflation drops, with an 85.1% chance of rates being held in January. US Jobless Claims data showed a decline to 214K, surpassing market expectations of 223K.<\/p>\n
Australia’s inflation was 3.8% in October, exceeding RBA targets. A potential rate hike in February 2026 is anticipated, with banks projecting a rise to 3.85%. The AUD\/USD pair approached 0.6700, maintaining a bullish trend, while initial support is found around 0.6684. The Australian Dollar performed strongest against the New Zealand Dollar.<\/p>\n
Given the thin holiday trading, we are seeing the Australian Dollar hold its ground, supported by better-than-expected manufacturing data from China. We’ve also seen iron ore futures on the Dalian Commodity Exchange rebound to over $140 per tonne in December 2025, a level not seen since the third quarter. This strength in Australia’s largest trading partner and key export provides a solid foundation for the currency as we enter the new year.<\/p>\n
The main driver for the Aussie dollar in the coming weeks will be domestic inflation and the Reserve Bank of Australia’s response. With inflation remaining stubbornly above target throughout 2025, all eyes are on the Q4 CPI report due on January 28. A strong reading will likely cement expectations for an RBA rate hike at its first meeting of the year on February 3.<\/p>\n
On the other side of the pair, the US Federal Reserve appears to be on pause after cutting rates three times in 2025. The last Non-Farm Payrolls report from early December 2025 showed job growth slowing to 150,000, confirming the cooling labor market that prompted those earlier cuts. For now, the US dollar is not getting any new support from its central bank, creating a clear policy divergence with the RBA.<\/p>\n
With a bullish technical setup and a hawkish RBA, we believe buying call options on the AUD\/USD is a sensible strategy. This allows us to profit from a potential move up towards the October 2024 high of 0.6727, while limiting our risk to the premium paid. These positions would be best structured to expire after the February 3 RBA meeting to capture the potential volatility from a rate hike.<\/p>\n
The most certain event in the short term is the spike in volatility we expect around the January 28 inflation data. We can see this tension reflected in the implied volatility for AUD\/USD options expiring after that date, which has ticked up to over 10%. A long straddle, buying both a call and a put option, could be used to profit from a large price swing in either direction following the data release.<\/p>\n
We must also manage our risk, and the technical chart gives us a clear line in the sand. The ascending channel support around the 0.6680 level is a critical area to watch. A decisive break below this level would signal that the current bullish trend is failing, and it would be prudent to use put options to protect any long positions.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Australian Dollar holds steady as China\u2019s PMI rises; RBA hints at rate hikes pending inflation data.<\/p>\n","protected":false},"author":62,"featured_media":16959,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-37994","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/37994","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=37994"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/37994\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/16959"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=37994"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=37994"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=37994"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}