The Reserve Bank of Australia (RBA) decided on Tuesday to keep interest rates unchanged at 3.60%, as widely expected, with projections indicating that rates will likely remain at this level throughout next year. Recent Australian economic data continue to show resilience in economic performance, as evidenced by:
- The Manufacturing PMI, which recorded an expansion at 51.6, in line with expectations but above the previous reading of 49.7.
- The Services PMI, which rose to 52.8, exceeding expectations (52.7) and the previous reading (52.5).
- The annual headline Consumer Price Index, which climbed to 3.80%, above both expectations (3.60%) and the prior reading (3.50%).
The Australian dollar strengthened notably, with AUD/USD reaching 0.6654 yesterday—its highest level since September 18, 2025. The pair has gained approximately 4% from its November 21 low of 0.6421 to yesterday’s high, and is now up around 7% year-to-date, currently trading above the 0.6600 level.
In addition, a key driver supporting AUD/USD has been the weakness in the U.S. dollar index, which is trading near 99—partly due to expectations of a 25-basis-point rate cut by the Federal Reserve in today’s meeting. However, caution is warranted, as there is a notable split within the Fed: some members may vote to keep rates unchanged, others for a 25bps cut, and a few may even lean toward a 50bps cut.
If the Fed delivers a widely expected 25bps cut, market focus will shift to Chair Powell’s tone, which may turn cautious a “hawkish cut.” Powell could highlight persistent inflation risks, the impact of tariff-driven price pressures, and the Fed’s continued commitment to achieving the 2% inflation target. Such a tone could weigh on AUD/USD and offer support to the U.S. dollar index.
From a technical perspective, a break below the pivot point at 0.6635 could open the door toward support levels at 0.6615, 0.6589, and 0.6569. Conversely, if the pair sustains a move above the pivot, resistance levels are expected at 0.6661, 0.6681, and 0.6707.
The RSI currently stands at 68, indicating positive momentum for AUD/USD. Meanwhile, the MACD shows a bullish crossover between the blue MACD line and the orange signal line, reinforcing the outlook for continued upside momentum.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
