AUD/USD inches higher, holding around 0.6690 for a second consecutive session as trading volumes remain thin due to the New Year’s holiday in Australia.
The pair showed limited reaction to China’s official Manufacturing PMI, which rose to 50.1 in December from 49.2, exceeding market expectations. The NBS Non-Manufacturing PMI also improved to 50.2 versus a forecast of 49.8. RatingDog’s Manufacturing PMI climbed to 50.1 from 49.9.
RBA outlook supports AUD
The Australian Dollar finds support amid expectations of interest rate hikes from the Reserve Bank of Australia (RBA). RBA Governor Michele Bullock noted that while the board did not explicitly discuss a rate hike, it considered conditions that could warrant higher rates in 2026.
December meeting minutes highlighted readiness to tighten policy if inflation does not ease, with markets focused on the Q4 CPI report due January 28. Analysts expect that stronger-than-forecast core inflation could prompt a rate increase at the RBA’s February 3 meeting.
US Dollar shows resilience after FOMC minutes
The US Dollar Index (DXY) trades near 98.20 after modest gains in the previous session. FOMC minutes from December revealed that most officials judged further rate cuts may be appropriate if inflation declines, while some preferred holding rates steady following three reductions in 2025.
The Fed lowered rates by 25 bps in December to 3.50%–3.75%, completing a cumulative 75-bps cut over the year. US initial jobless claims fell to 214K, beating expectations, while continuing claims rose to 1.923 million. CME FedWatch indicates an 85.1% probability of rates being held in January, with the likelihood of a 25-bps cut falling to 14.9%.
Technical outlook: AUD/USD tests 0.6700
Technical analysis shows AUD/USD remains in an ascending channel, maintaining a bullish bias. The pair trades above the rising nine-day EMA, keeping the short-term uptrend intact. The 14-day RSI at 64.8 confirms bullish momentum, though not yet overbought.
Immediate resistance sits at the psychological 0.6700 level, followed by 0.6727, the highest since October 2024. A break above could open the path toward the channel’s upper boundary near 0.6850. On the downside, support aligns with the nine-day EMA at 0.6684 and the lower channel boundary around 0.6680. A breach could see the pair test the six-month low near 0.6414.
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