Potential Gains and Supports Analysis
A break above 0.6707 could lead to further gains towards 0.6800, while support is at 0.6600, aligning with the 21-day SMA. A fall below 0.6600 might target the 50-day SMA at 0.6550, possibly leading to a deeper pullback towards 0.6500 and 0.6450 if breached.
The Australian Dollar (AUD) is impacted by RBA interest rate decisions, the price of Iron Ore, and the Chinese economy’s health. High interest rates aid AUD, while low rates do the opposite. Increases in Iron Ore prices positively impact AUD, due to Australia’s robust trade with China. A positive trade balance strengthens AUD, enhancing its international value.
We’re seeing a clear upward trend in the Aussie dollar, with momentum building as it holds above the 0.6600 mark. This is largely driven by the policy split between an RBA concerned about persistent inflation and a US Fed that is expected to continue easing policy into 2026. This fundamental difference supports a stronger AUD/USD exchange rate.
Strategic Considerations for Traders
For traders, this suggests positioning for further upside in the weeks ahead. Buying call options with strike prices aiming for the 0.6800 psychological level could be a viable strategy, especially for January or February 2026 expirations. This approach allows us to capitalize on the strengthening trend while defining our maximum risk.
This bullish view is reinforced by recent economic data we’ve seen. Australian quarterly inflation for Q3 2025 came in at 3.5%, remaining stubbornly above the RBA’s target band and justifying their hawkish tone. In contrast, the latest US PCE inflation data for November 2025 cooled to 2.4%, giving the Fed more reason to ease, while iron ore prices have stayed firm above $120 per tonne.
