The Australian Dollar has reached a 14-month high against the US Dollar at 0.6727. This rise is due to expectations of interest rate increases by the Reserve Bank of Australia. The RBA’s recent meeting minutes suggest a potential for more tightening if inflation remains high, making the upcoming Q4 CPI report highly anticipated.<\/p>\n
China plans to focus on key sectors like advanced manufacturing and technological innovation, affecting Australia’s economy due to trade ties. Meanwhile, China’s military drills around Taiwan present ongoing geopolitical risks, which could influence regional markets. In the US, the Dollar Index is declining, trading around 97.90, amidst expectations of potential rate cuts by the Federal Reserve in 2026.<\/p>\n
The Fed recently reduced interest rates by 25 basis points, now in a range of 3.50%-3.75%. The probability of rates remaining stable at the Fed’s next meeting is 81.7%. Initial Jobless Claims in the US fell to 214,000, while continuing claims rose slightly. The US GDP expanded by 4.3% annually from July to September, exceeding expectations.<\/p>\n
Australia’s inflation rose to 3.8% in October, supporting rate hike projections for February 2026. Consumer Inflation Expectations increased to 4.7% in December. The AUD\/USD is currently moving upwards, maintaining a bullish trend, with immediate resistance at 0.6727.<\/p>\n
We are seeing a clear divergence in monetary policy between Australia and the United States, which should guide our strategy. The Reserve Bank of Australia is signaling a potential interest rate hike while the Federal Reserve is leaning toward more cuts in 2026. This fundamental difference supports a bullish outlook for the Australian dollar against the US dollar.<\/p>\n
The most critical event in the coming weeks will be Australia’s fourth-quarter inflation report on January 28. A stronger-than-expected number will almost certainly lock in a rate hike at the RBA\u2019s February 3 meeting. Derivative traders should consider positioning for a move higher in AUD\/USD leading into and through this data release.<\/p>\n
Looking back, we saw a similar situation unfold in late 2023, when stubbornly high quarterly inflation forced policymakers to maintain a hawkish stance even as other central banks paused. With Australia’s October 2025 inflation at 3.8% and consumer expectations rising, history suggests the RBA will be compelled to act if the upcoming CPI data remains elevated. This provides a strong historical precedent for the trade.<\/p>\n
The technical picture for AUD\/USD is also constructive, with the pair trading in a firm uptrend. Clearing the immediate resistance at the 14-month high of 0.6727 would open the door for a push toward the 0.6830 level. Call options with a February 2026 expiry could be an effective way to play for this anticipated move.<\/p>\n
On the other side of the pair, the US dollar remains under pressure due to the Fed’s dovish stance, despite some strong recent data like the 4.3% Q3 GDP growth. While the US labor market generally cooled throughout 2025, we should remain watchful for any surprises in the upcoming December jobs report, similar to the unexpectedly strong 216,000 jobs that were added in the report for December 2023. A strong jobs number could provide temporary support for the dollar but is unlikely to change the Fed’s overall path.<\/p>\n
We must also monitor the risks, as China’s military drills around Taiwan could sour risk sentiment and weigh on the Aussie dollar. From a technical standpoint, the RSI is in overbought territory, suggesting a brief consolidation or dip is possible before the next leg up. Such a dip could present a better opportunity to enter long positions.<\/p>\n
China’s fiscal stimulus plans offer a potential tailwind for the Australian economy and its currency. This view gains some credibility from recent data, as we saw the Caixin Manufacturing PMI for November 2025 hold in expansionary territory at 50.7. Any signs that this stimulus is boosting industrial demand would be very positive for Australian exports and the AUD.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Australian Dollar hits 14-month high; interest rate expectations and China trade ties drive bullish momentum.<\/p>\n","protected":false},"author":62,"featured_media":16962,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-37784","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\/37784","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=37784"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/37784\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16962"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=37784"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=37784"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=37784"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}