The FXStreet Insights Team
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We are seeing the AUD/USD hold a significant support level at 0.6410, which represents the lows from back in August 2025. The pair has since climbed back above its 200-day moving average, a positive technical signal for the short term. The immediate challenge is the descending trend line near 0.6600, a level that has capped gains since 2021.
RBA vs US Federal Reserve
In contrast, the market is beginning to anticipate that the US Federal Reserve will start cutting rates in mid-2026 as their inflation battle shows more progress. This growing difference in central bank policy, with our RBA holding firm while the Fed looks to ease, is a classic driver for a higher AUD/USD. This creates an environment where owning the Australian dollar against the US dollar is attractive.
For traders expecting a break above the 0.6600 resistance, buying call options with strike prices of 0.6650 or 0.6700 could be a strategy. Choosing expirations in late January or February 2026 would give the pair enough time to potentially test the September 2025 highs around 0.6710. This approach offers a defined risk while capturing potential upside momentum.
The key risk to this outlook is the 0.6410 support level. If the pair were to fall and close below this mark, the bullish case would weaken considerably. To manage this risk, traders could use put options with a strike price near 0.6400 as a hedge or to position for a potential breakdown.
We also see supportive news from commodity markets, which are crucial for the Australian economy. Iron ore prices have been strong, trading above $130 per tonne recently. Continued strength in key exports like this provides an additional tailwind for the Australian dollar.
