The Australian Dollar (AUD) has weakened against the US Dollar (USD) for six consecutive days, trading below 0.6600. The AUD\/USD pair may gain temporary support from markets anticipating a rate hike by the Reserve Bank of Australia (RBA) amidst rising inflation expectations, which reached 4.7% in December.<\/p>\n
The RBA is expected to tighten monetary policy sooner, as suggested by major banks, with a 28% chance of a rate hike in February increasing to nearly 41% by March. The price of Iron Ore, inflation rates, and Australia’s economic ties with China also influence the AUD’s value. The US Dollar remains steady with the Dollar Index trading around 98.40, ahead of the delayed US Consumer Price Index report.<\/p>\n
The Federal Reserve’s approach to interest rates is cautious, with a 75.6% chance of maintaining rates at the upcoming January meeting. Recent US economic indicators, such as a rise in the unemployment rate to 4.6% and flat retail sales, highlight a cooling labour market. Other influencing factors include China’s mixed economic data and the Australian Bureau of Statistics reporting a stable unemployment rate of 4.3% in November.<\/p>\n
The AUD\/USD technical analysis suggests the pair is trading below its nine-day EMA, indicating weak short-term momentum. If the pair falls, it could reach 0.6500, but resistance near 0.6619 could spark a rebound towards higher levels.<\/p>\n
We are seeing the Aussie dollar continue its slide against the US dollar, now on its sixth straight day of losses and trading below the 0.6600 mark. This downward momentum suggests that short-term bearish strategies could be favored. The break below the ascending channel trend is a significant signal of this weakening bias for now.<\/p>\n
The key tension to watch is the diverging central bank outlooks, which could create significant volatility in the coming weeks. While we see markets pricing in a 41% chance of a Reserve Bank of Australia rate hike by March 2026, the CME FedWatch Tool shows a high 75.6% probability of the US Federal Reserve holding rates steady in January. This policy difference is creating a fundamental tug-of-war for the currency pair.<\/p>\n
The Fed’s patient stance is backed by weakening US economic data, which we need to monitor closely. The US unemployment rate hitting 4.6% is a high we haven’t seen since the post-pandemic recovery phase of 2021, indicating a clearly cooling labor market. This trend, combined with flat retail sales last month, dampens the case for a stronger US dollar in the medium term.<\/p>\n
A significant risk for any bullish AUD position is the recent poor economic data out of China, Australia’s largest trading partner. The disappointing figures in retail sales and industrial production suggest a slowdown that directly impacts demand for Australian exports. Reports this week show iron ore prices, a key Australian export, have also slipped from their recent highs to below $110 per tonne, further pressuring the Aussie.<\/p>\n
Given these conflicting signals, traders might consider strategies that profit from increased volatility rather than a clear directional bet. Options strategies like straddles or strangles could be effective, with the AUD\/USD caught between strong technical support around the 0.6500 psychological level and resistance near the three-month high of 0.6685. The implied volatility in AUD\/USD options reflects this uncertainty, having risen over 5% in the past month as these central bank narratives diverged.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" AUD weakens against USD; possible RBA rate hike, iron ore prices, and China ties may support rebound.<\/p>\n","protected":false},"author":62,"featured_media":16966,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-37189","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-ca\/wp-json\/wp\/v2\/posts\/37189","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=37189"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/37189\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16966"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=37189"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=37189"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=37189"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}