The AUD/USD traded near flat after experiencing a data-induced jump following Australian inflation statistics. November’s Consumer Price Index (CPI) showed a slowing in inflation, yet it remained above the Reserve Bank of Australia’s target range of 2-3%. Despite overbought indicators, the technical outlook remains bullish, with prices nearing 15-month highs.
In November, the general CPI was unchanged month-on-month, while the annual figure decreased to 3.4% from 3.8%. The trimmed mean CPI increased by 0.3% monthly and eased to 3.2% annually. Conversely, US economic data presented mixed signals, with private payrolls increasing by 41K and JOLTS data revealing a decrease in job openings to 7.146 million.
Technical Analysis Overview
Technically, the Relative Strength Index (RSI) approached overbought territory, suggesting a potential pullback. However, the broader trend remains bullish, with the pair trading above key Simple Moving Averages. Initial support is anticipated near 0.6660, with resistance likely near the 0.6800 level.
The US Dollar showed varied performance against major currencies, strengthening the most against the British Pound. The heat map illustrates percentage changes in major currency pairs, with the base currency chosen from the left column and the quote currency from the top row.
The AUD/USD is holding near its highest levels in over a year, but the uptrend is showing signs of fatigue. The Relative Strength Index is near 70, suggesting the pair is overbought and a temporary pullback could happen soon. We see the broader trend as bullish, but caution is warranted in the immediate short term.
Economic Factors and Predictions
We believe the Australian dollar remains supported by domestic factors, as November’s inflation data showed price pressures are still above the RBA’s target. Recent figures show the unemployment rate remains steady below 4%, and prices for iron ore, a key export, have stabilized above $130 a tonne. Looking back at 2025, the RBA’s struggle with persistent inflation kept them from signaling any rate cuts, which continues to support the Aussie dollar.
On the US side, the economic picture is less clear, creating some uncertainty for the dollar. While last month’s ISM Services data was strong, job openings have been declining, which signals a cooling labor market. Markets are now awaiting this Friday’s Non-Farm Payrolls report for a clearer direction, with futures markets pricing in a 65% chance of a Federal Reserve rate cut by June.
For derivative traders, this environment suggests considering strategies that protect against a short-term drop while keeping exposure to the longer-term uptrend. Buying put options with a strike near 0.6700 could be a cost-effective way to hedge against a pullback toward the 0.6660 support level. Alternatively, for those holding long positions, selling covered calls with a strike above 0.6800 could generate income while the pair consolidates.
The key technical levels to watch are the initial support around 0.6660, followed by the stronger zone near 0.6570 where major moving averages converge. A successful hold at these levels could present an opportunity to buy call options, targeting an eventual move toward the 0.6800 psychological barrier. The trend’s strength, confirmed by the high ADX reading, suggests dips are likely to be viewed as buying opportunities.
